APIC ’16: Petchem feedstocks to be well supplied – consultant

SINGAPORE (ICIS)–Petrochemical feedstocks will be well supplied in the near term despite the delays and technical issues which have slowed refining capacity expansions, an industry consultant said on Thursday.

Some 2.2m bbl/day of new refining capacity is expected to come on stream in 2014-2016, versus an estimated 2.7m bbl/day of demand which has benefitted from lower crude oil prices, said Stefano Zehnder, a vice president at ICIS Consulting.

Refineries are the largest source of naphtha.

“As more oil and gas will be required, more NGLs will be available. A lower oil scenario may will still leave US with wide light NGLs availability and LPG exports, whilst ethane balances could get tighter,” he said.

Zehnder was speaking at the 37th Asia Petrochemical Industry Conference in Singapore which runs on 19-20 May.

“Despite some recent tightness in gasoline, fuel efficiencies and rapidly growing refining capacity will ensure comfortable naphtha supply in international markets,” he said.

Strong demand has supported refinery margins until the third quarter of last year, but these are fading amid “resilient competitive positioning” in the US and increased interest for heavier grades as the Brent-WTI crude spread declines, Zehnder said.

The move to focus on diesel production and rationalise fluid catalytic cracking (FCC) capacities in the EU and US have come at the wrong time as non-OECD diesel demand has been affected by the slowdown in industrialising countries, particularly in China, he said.

While lower oil prices stimulate private car usage globally, gasoline demand growth is projected to ease in the US and continue to fall in Europe, according to Zehnder.

Looking ahead to 2017-2021, the amount of new global refining capacities is expected to grow by 7.8m bbl/day, Zehnder said.

Even cancelling 50% of Asian projects in 2017-2018, global additions would approach 1.5m bbl/day each year, he added.

“Unless incremental closures are implemented, recent margins are unlikely to be maintained,” he said.

Once gasoline export opportunities fade, European runs and capacity are at risk but the option  for naphtha diversion from the gasoline pool should remain, Zehnder added.