31 July 2009 15:20 [Source: ICIS news]
By Steven McGinn
HOUSTON (ICIS news)--The obituary for US MTBE production may have come closer to being written due to LyondellBasell's coming switch to making ethyl-tertiary butyl-ether (ETBE). But the stars are aligning in a way that may yet breathe new life into ?xml:namespace>
Despite the steady domestic production decline and its phase-out from the
MTBE was developed in the early 1970s by engineers at the Atlantic Richfield Company (ARCO) as a method to “get the lead out” and boost octane in gasoline.
“It is probably the best gasoline component developed since alkylates in the 1930s,” said Cal Hodge of consultancy firm A 2nd Opinion.
The picture was sharply different 20 years ago. MTBE use was encouraged by the Clean Air Act (CAA) amendments of 1990, which required the use of oxygenated gasoline in areas with heavy levels of air pollution.
While the CAA did not specifically require MTBE, refiners preferred it because it could be produced and then added into the gasoline directly at the refinery. Another advantage was that unlike other oxygenates – such as ethanol – MTBE could be readily transported using pipelines.
The trouble for MTBE began in 1999 when the state of
Anti-MTBE opinion subsequently swelled as several other states reporting similar findings, but its defenders pointed out that neither MTBE itself nor refiners were to blame.
Rather, the problem was caused by leaks from underground gasoline storage tanks operated by retailers who figured it would be cheaper to lose a few gallons a day instead of replacing an entire tank.
But the political wind had already shifted and the major refiners in
Federal legislators followed suit in the Energy Policy Act of 2005, which left refiners exposed to liability for the leaking underground storage tanks.
The momentum against MTBE was complemented by the growing
More than 80% of US MTBE production across the country was eventually closed, and current production has dwindled to around 40,000 bbl/day.
Domestic use is now limited to specialty fuels such as drag racing. Most US MTBE is exported to Latin America – especially
With competition dwindling amid the shutdowns of recent years, the remaining players – LyondellBasell, Huntsman and Texas Petrochemicals (TPC) - have enjoyed favourable margins thanks to historically cheap feedstock prices, low supply and high demand.
Upstream, US methanol prices are at 6-year lows, according to data from global chemical market intelligence service ICIS pricing.
On the supply front, MTBE output in the US Gulf coast (USG) will drop in October when LyondellBasell – the largest
Supply will be squeezed even tighter in the first quarter of 2010 because Huntsman has scheduled a 2-3 month turnaround of its
The combined effect of those two events is expected to put upward pressure on prices.
Given the favourable margins, tight supply and a firm export market, many market sources have speculated that TPC may flip on the switch at its shuttered 24,000
While that would be a stark reversal of the trend, it would not signal any change in attitudes to domestic use. The National Petrochemical & Refiners Association (NPRA) has acknowledged that it is very unlikely that MTBE could ever make a comeback to the domestic gasoline pool.
Still, a renewed glow from the embers of the US MTBE industry would at least warm the hearts of those who have mourned the decline of the clean-burning fuel.
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