Global naphtha surplus forecast to grow; Rising oil product exports split US-Mexico trade balance
Petrochemicals news you need to know.
Naphtha oversupply predicted until at least 2020
The global naphtha market is to remain oversupplied until at least 2020 despite projected annual demand growth of 1.7%, according to new research by market analyst firm IHS Markit.
"We are headed into an increasingly oversupplied market...Naphtha is no longer the dominant petrochemical feedstock it once was thanks to competition from the surging production of NGLs, particularly ethane and propane,” Nick Rados, senior director at IHS Markit, said in a statement February 16.
Global demand for naphtha was 1,180 million metric tons (MMT) at the start of 2017 and is expected to grow to 1,260 MMT by 2020, IHS Markit said.
However, the U.S. shale gas and tight oil renaissance has provided North American and Western European petrochemical producers a cheaper alternative to naphtha.
U.S. and Canadian NGL production has surged at an average annual growth rate of 6.2% since 2011, from 104 MMT to 141 MMT in 2016.
“Olefins producers with the existing flexible, or new, ethane-feedstock plants in the U.S., are enjoying an advantage due to lower feedstock costs, and for European producers, the access to abundant supplies of U.S. ethane feedstocks have given their plants new life,” Rados said.
In addition, Saudi Arabia, U.A.E., Kuwait, and Russia are investing in new naphtha production capacity. In one example, Russia's Novatek brought online a condensate splitter to add 4 MMT naphtha supply, representing 3.5% of global naphtha trade.
The propane market will be even more oversupplied than the naphtha market, as production increases are expected from U.S. shale resources as well as in the Middle East and Russia. Falling propane prices have also put downward pressure on naphtha prices.
“The current length in the propane shipping fleet, along with the opening of the Panama Canal expansion supports incremental trade, but anticipated increase in crude and naphtha prices will drive even greater volumes of low-cost propane to Asia,” Rados said.
European petrochemicals producers are following contrasting feedstock procurement strategies.
"While some have bet on excess of U.S. ethane...others like Dow and BASF have bet on global oversupply of cheaper propane coming from Russia, the U.S. and Algeria,” Rados said.
The U.S. has already ramped up ethane exports to Western Europe. Shipments from the Enterprise Products Partners terminal on the U.S. Gulf Coast and the Sunoco Logistics terminal on the U.S. East Coast will supply the European facilities owned by INEOS, SABIC, Reliance, ExxonMobil and others, IHS Markit said.
Rising US oil product exports to Mexico widens energy trade surplus
U.S. oil product exports to Mexico hiked in 2016 while crude oil imports fell, raising the value of U.S. energy exports to Mexico to $20.2 billion and cutting the value of imports to $8.7 billion, the U.S. Energy Information Administration (EIA), said February 9.
"In 2015 and 2016, the value of U.S. energy exports to Mexico, including rapidly growing volumes of both petroleum products and natural gas, exceeded the value of U.S. energy imports from Mexico as volumes of Mexican crude oil sold in the United States continued to decline," EIA said.
Mexico is the U.S.' second-largest energy trade market, after Canada, and petroleum products account for most of the value of energy exports from U.S. to Mexico.
US exported 690,000 barrels per day (b/d) of petroleum products to Mexico in 2015, and this rose to 849,000 b/d in the first 11 months of 2016.
"Changes in Mexico’s utilization of petroleum refineries have created a widening gap between its domestic supply and demand, and U.S. gasoline exports now make up more than half of Mexico’s gasoline consumption," EIA said.
"Compared with petroleum product exports, 2016 petroleum product imports from Mexico to the [U.S.] were relatively small, accounting for about 87,000 b/d and valued at $0.9 billion through November," it said.
US natural gas exports to Mexico are also rising fast.
"Based on data through November, U.S. natural gas exports to Mexico averaged 3.8 [billion cubic feet per day] in 2016, and reports indicate that daily flows during early 2017 are already exceeding 4.2 Bcf/d," EIA said.
In addition, new gas pipelines under construction are expected to double U.S. to Mexico gas export capacity by 2018.
"Much of this natural gas will likely be used to generate electricity," EIA noted.
By 2029, Mexico is forecast to start up around 24.9 GW of gas fired power capacity.
US' largest methanol plant set to start up in Q4
OCI and G2X Energy's 1.75 million tons per year (mpta) Natgasoline methanol facility in Beaumont, Texas is likely to come online in Q4 2017, Platts reported February 10.
The Natgasoline plant will be the largest methanol facility in the U.S. and is likely to pressure prices when it comes online, sources told Platts.
"A Q4 startup seems most likely for the plant, sources said, with one saying it could come as late as the first quarter of 2018," Platts reported.
Increasing production capacity has shifted the U.S. towards being a net exporter of methanol.
U.S. methanol production capacity started 2015 at 2.25 mpta and rose to 5.75 mpta by the start of 2016, according to Platts.
The Natgasoline plant will increase U.S. methanol capacity to 7.5 mpta.