“Non-refinery supply is forecast to grow by just over 80 million tonnes per annum [MMtpa] between 2006 and 2010, due to increased NGLs production and from the drive to increase biofuels consumption,” says Wood Mackenzie downstream research manager Aileen Jamieson.
“While rising refinery project costs [80-100% percent higher since 2002] have led to significant delays and cancellations of a number of key projects post 2010, this reduction in new refinery capacity alone is not enough to counter the oversupply issue. Large clean product surpluses emerging in the Middle East and Asia Pacific are projected to affect utilisation rates in the East of Suez region.”
The report says the impact of the US ethanol mandate and potential future ethanol development, has led refiners to raise doubts about adding refining capacity. As a result, the gasoline deficit in North America will continue to grow by 2010, contrary to an industry expectation that this deficit will be reduced in the short-term. This will provide an outlet for Europe’s gasoline surplus, which is expected to continue to grow.
Wood Mackenzie anticipates almost 50MMtpa of ethanol will be used globally by 2010, while just less than 20MMtpa of biodiesel will be consumed. Brazil and the US are projected to account for 75% of global ethanol consumption, while the European Union accounts for almost two-thirds of biodiesel use.
The growth in NGLs production will also lead to a growing surplus of liquefied petroleum gas at the same time as a large and growing deficit of naphtha, due to strong demand for petrochemicals. Therefore feedstock flexibility will be key for petrochemicals manufacturers in the Middle East and Asia Pacific, where the greatest LPG-naphtha imbalances occur.
Meanwhile, overbuild of refinery upgrading units such as cokers and FCCs is leading to a global oversupply of gasoline and a growing shortage of fuel oil.
Despite expected changes in refinery utilisation and yield patterns, as refineries are re-optimised to meet changing demand patterns, gasoline remains with an incremental surplus of 16MMtpa, while fuel oil is incrementally 16MMtpa short, globally, leading to downward pressure on the gasoline price and upward pressure on fuel oil price.
