11 June 2012 00:00 [Source: ICB]
Around 95% of methyl tertiary butyl ether (MTBE) produced is used as an octane booster and as an oxygenate in gasoline. One of its major advantages is its good properties for blending and for increasing the octane levels of lead-free gasoline. Effectively, all US-produced MTBE is sold into the export market and destined for the Latin America market.
Tight MTBE supply on the US Gulf (USG) began at the end of 2011 and persisted until May 2012. Towards the end of 2011, one Gulf coast producer was running at lower-than-expected production rates.
Snugness in the market continued into the second quarter as LyondellBasell started maintenance at its Channelview olefins complex in Texas. In mid-April, US-based Enterprise Products announced that it was shutting down its MTBE unit in Mont Belvieu, Texas, for four weeks, further tightening the US Gulf coast market.
In TPC Group's 2011 SEC filing, the company stated it no longer sells MTBE in the US market and is focusing instead on opportunistic sales to export markets.
It no longer produces MTBE at its facility in Port Neches, Texas, but produces it at its facility in Houston, Texas, albeit only as a by-product of C4 processing operations.
Persistent restricted MTBE supply on the US Gulf coast and in Europe, paired with robust demand from Latin America, resulted in many producers holding low inventories and limited availability of product in the first and second quarters of 2012.
Venezuela's refining circuit reported several incidents in the past months that affected the production capacity of refined products and forced Venezuela to look for more product from the US Gulf coast and Europe.
Petroleos de Venezuela's (PDVSA's) Amuay refinery, part of the Paraguana Refining Complex in western Venezuela, began planned maintenance in January. The refinery restarted in April. In February, PDVSA shut down a crude distillation unit at the Cardon refinery after a fire. A fluid catalytic cracking (FCC) unit was shut in late February after a valve failure.
The Paraguana Refinery Complex has the capacity to process 940,000 bbl/day and includes the Amuay, Cardon and Bajo Grande refineries.
USG MTBE prices have been volatile since the beginning of the year in response to purchase tenders from Venezuela amid a backdrop of low inventories, and this resulted in unusually sharp price increases.
Lack of liquidity on the US domestic market has meant US MTBE prices are entirely based on the European MTBE prices and a discount or premium over trades in Europe. Premiums of up to 5 cents over European values have been constant throughout the year to date.
Prices out of the USG at the beginning of 2012 averaged in the mid-340s cents/gal and surged to over 440 cents/gal by early April.
As supply normalized in the USG going into mid-April, MTBE premiums have eased to about 3 cents/gal and values have pulled back into the 320s cents/gal, as assessed by ICIS.
The reaction of isobutene with methanol over a catalyst bed produces MTBE. The reaction can take place in either a liquid-phase reactor or a mixed gas-liquid-phase reactor that contains an acidic ion exchange resin. Alternatively, sulfuric acid can be used as a catalyst.
The use of MTBE as a gasoline additive has been under threat, leading to the development of processes that convert existing units to produce high-octane alkylate products.
Italian engineering group Snamprogetti developed the SP-Isoether process, allowing conversion of an MTBE plant to produce iso-octane using highly selective isobutylene dimerization without the need for acid alkylation.
US engineering and construction major Kellogg Brown & Root joined forces with Finland's Fortum Oil and Gas to offer a process called Nexoctane for producing iso-octane from existing MTBE facilities. US-based Honeywell's UOP, a process technology firm, offers the indirect alkylation InAlk process, which can revamp MTBE plants to produce a high-octane paraffinic gasoline blendstock.
The popularity of MTBE is what led to its downfall in the US. As a result of its increased use as a fuel additive, MTBE was found to contaminate some water supplies in the US, primarily from underground gasoline storage tanks that leaked.
Following the ban issued in 2005, the internal US market ceased. All MTBE produced in the US is exported, mostly to Latin America - especially Venezuela, Mexico and Chile.
As more then 90% of MTBE is used for gasoline production, major petrol producers in each of the countries are the principal buyers of MTBE produced both domestically in Latin America and in the US.
Latin America markets do not have a local price benchmark and use Europe MTBE prices and USG gasoline prices as their price reference. While the trade is not very intensive, the market situation is characterized as stable and with the normalization of the supply scenario on the USG and US crude futures dropping below $90/bbl, MTBE prices are expected to see less volatility in the coming months.
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