Is the world heading for a naphtha crisis?

Quite possiby says International e-Chem and Wood Mackenzie in a new study which predicts that by 2015, China could have a deficit of as much as 35m tonnes.

When you consider that total global output is around 300m tonne/year, this is quite staggering.

On paper, China should be balanced on naphtha because of a huge refinery construction wave. However, the consultants argue that the refineries will be run primarily to make gasoline. The importance of gasoline supply to China as a means of stimulating economic growth, thereby maintaining social stability, was illustrated yesterday when the government raised fuel prices by 10%. The hope is that the price hike will end shortages through boosting refinery production as a result of improved refinery margins.

And globally, will there be enough naphtha to supply China? Many of the 700 or so refinery projects being built could be delayed or cancelled because of rising construction costs and tight contractor and raw material markets.

Even if there is enough supply on paper, will refiners want to make the naphtha that China and the rest of the world needs? Quite possibly not as naphtha only accounts for around 5% of total refinery output.

Therefore, globally, as in China, refineries exit primarily to maintain supply and make money from the transportation sector.

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