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New report details oil and petrochemical opportunities as US becomes net exporter
Oil and chemical traders believe the U.S. will become a net exporter for the first time in generations, according to Petrochemical Update’s North American Downstream Market Outlook and Insights 2019.
By the end of 2019, total U.S. oil production including natural gas liquids (NGLs) used in the petrochemical industry is expected to rise to 17.4 million barrels/day according to the U.S. Energy Information Administration (EIA).
U.S. crude oil production and subsequently petrochemical production has increased significantly during the past ten years, driven mainly by production from tight oil formations using horizontal drilling and hydraulic fracturing.
Total U.S. oil production is rising at the fastest pace in nearly 100 years and the pipeline bottleneck everyone warned about looks set to ease as early as the end of 2019.
At this rate, many analysts are predicting that Texas will surpass Iraq and Iran and pave the way for the U.S. to become the world’s leader in oil production.
Most recently, U.S. crude oil production reached 11.3 million barrels per day (b/d) in August 2018, according to the U.S. EIA Petroleum Supply Monthly in November, up from 10.9 million b/d in July.
This is the first time that monthly U.S. production levels surpassed 11 million b/d. U.S. crude oil production exceeded the Russian Ministry of Energy’s estimated August production of 11.2 million b/d, making the U.S. the leading crude oil producer in the world.
Image: American Chemistry Council
At that rate, oil and chemical traders believe the U.S. will become a net exporter, something that has not happened for 75 years.
In the face of this almost unprecedented growth, the market is dealing with instability in oil prices, mega disruptions in technology, and a growing trade war. This confluence of market factors is driving new investments and a reconfiguration of the status quo.
It is within this ever-shifting landscape of growing opportunities and new challenges that Petrochemical Update have launched their annual Downstream outlook report: The Complete North American Downstream Market Outlook 2019, a detailed profile of the downstream petrochemical, chemical, refining and LNG value chains.
The complimentary North American Downstream Market Outlook & Insights Report 2019 released this week covers the entire downstream value chains, including:
• status of major capital projects and outlooks
• maintenance case studies
• turnaround project stories
• process engineering trends
• Trade War impact to petrochemicals
• requirements and benefits for building in the Appalachia Region and in Canada
The report includes in-depth interviews featuring insights and case studies from companies including: Dow Chemical, Lyondellbasell, Jacobs, ICIS, American Chemistry Council, Industrial Info Resources, and Pathfinder LLC.
As the U.S. becomes the largest energy and petrochemical producer in the world, it has created the biggest challenge the downstream sector has seen in a generation.
Demands for innovative solutions for the supply chain, workforce, project management, engineering, construction, and technology management have never been so vast.
Some of the key trends explored within the report include:
Building the next wave differently. The first wave of petrochemical investment in the U.S. was rushed and owners and EPC firms are taking learnings from the first round as they embark on another set of investments.
Design for reliability. Maintenance and reliability professionals need to be able to clearly articulate how reliability and maintainability can be linked to business profits. While companies talk about the importance of reliability, few understand that reliability is a design attribute. The maximum level of reliability a plant can achieve is set by its design.
Creating a Culture of Improvement. More than 80% of the downstream industry is citing resourcing as their top challenge. The Baby Boomer Generation is retiring, and many Millennials are not interested in joining the downstream industry. The economy is booming, but the industry still has a skills gap, and there are concerns the sector will not be able to attract craft or high-tech jobs in the short or long-term future. An industry-wide adoption of better technology and reputation improvement are now mission critical.
Trade China is the U.S.’s number one import source while Mexico is second and Canada is third. Just over 20% of all imported goods come from China. Only 13% from Mexico and 13% from Canada. In 2017, the U.S. imported $505 billion in goods from China. The U.S. exported about $120 billion to China in 2017. The U.S. Administration has threatened to impose tariffs on all imports from China. The American Chemistry Council is now forecasting up to $11 billion worth of U.S. chemicals and plastics exports will be exposed to retaliatory tariffs.
Refinery/petrochemical integration. A decline in the growth of transportation fuels is causing more refiners to rethink their petrochemical strategy. The industry may see a higher conversion ratio of crude oil into chemicals.
Changes in China’s energy markets. The China energy industry is evolving. Key considerations are changes to China’s environmental laws, outside investment, and the ongoing trade war.
Growth in the Middle East. The Middle East will usher in a wave of new capacity through massive investments by 2025. The crude oil to chemicals facilities will produce a ratio much higher than the ethane-based chemicals produced in the U.S.
We hope you enjoy the report.
By Heather Doyle