As part of the fallout from the disruption of bitumen production in Alberta due to the Fort McMurray wild fire, Canada will require much less diluent from the U.S. The loss of at least 300,000 b/d of bitumen production that is not upgraded implies the elimination of nearly 100,000 b/d of diluent demand. This development will slow the 200,000 b/d flow of pentanes from the U.S. to Canada. A portion of this volume will absorbed by the U.S. market, including as light naphtha used as petrochemical feedstock, leaving a small amount of pentanes that can be exported to overseas petrochemical enterprises. The temporary availability of a small amount of additional light naphtha will be a welcome development for petrochemical users in Asia and Europe. But by and large, the U.S. naphtha exports have failed to grow much.

There are two reasons why U.S. naphtha exports are barely growing. First, refiners are processing less light oil. The integration of more medium and heavy crude into their crude slate undermines naphtha production. As a result, naphtha production is growing at too slow a pace for there to be a significant and sustained increase in the U.S.’s naphtha exports. Second, refiners’ production of more gasoline draws in heavy and light naphtha as reformate, isomerate or light naphtha blended directly into the gasoline pool. As a result of both developments, less naphtha is leaving the refinery gate.

“The naphtha market is a complex interaction of gasoline production and petrochemical use, and strong demand from both sectors overrides the impact of any temporary increase in light naphtha supply stemming from disrupted pentanes exports to Canada,” explains Andrew Reed, ESAI Energy Principal and one of the authors of the company’s new study, Naphtha Nexus: The Interaction of Global Gasoline, Naphtha and Petrochemical Markets to 2025. “Globally, petrochemical and transport demand for naphtha have both risen in response to low absolute prices. Due to high demand and the lack of more robust U.S. exports, there is intense competition between Asian and European buyers for available barrels from Russia and the Mediterranean.”

“The petrochemical and transport fuels markets are in transition,” comments Mr. Reed. In their newly released study, ESAI Energy examines how everything from gasoline demand and blending to shifting petchem feedstock slates will affect global naphtha use, pricing and trade flows for the next decade. “The current environment will give way to higher absolute prices, waning gasoline demand in key markets and shifting petrochemical feedstock slates and, eventually, even sustained growth of U.S. light naphtha exports.”
Source: ESAI Energy