abarrelfull wrote on 21 Dec 2009 06:50
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Exxon Invests in Refining Even as Margins hit Unprecedented Lows
created: 03 Jul 2014 08:55
tags: belgium exxon refinery
Everyone knows that refining is in a terrible state, at least it is in Europe.
Economic problems have led to declines in demand in what were already stagnant markets, WTI / Brent differentials and low Henry Hub gas prices mean that US refiners are able to produce more and sell into the European Market. The Jubail Refinery Project, the first of many Projects in the Middle East has come onstream and is selling diesel to Europe.
In the midst of this doom and gloom, Exxon announces that it is to invest $2 Billion in a project to upgrade its Antwerp Refinery in Belgium.
So what are we to make of this?
First of all, we need to remember that all refineries are not created equal, and that some are hurt worse than others by the current situation. The more complex you are, the better you can cope with the poor environment. This investment increases their complexity.
Secondly, the refining sector is a classic cyclical one, where the best investments are made counter cyclically. Only those with deep pockets (and they don't come much deeper than Exxon's) can afford to take such an approach. It is generally cheaper to do this and the investment finishes at a better time.
Thirdly, if you are going to survive, you need to produced the right products. Global demand for Residual Fuel Oil is on the wane, Natural Gas Liquids are eating directly and indirectly into the Gasoline market. The future is in Middle Distillates, Diesel & Jet Fuel.
Fourthly, Greenfield Refinery investments make money on the refining margin, that is the weighted average price of the products produced, minus the weighted average cost of the crude oil processed. Upgrading projects however, make money on the price differential between the products that you will be able to produce, minus the products being produced now. For a Delayed Coker, this means the differential between diesel and fuel oil, which is pretty large, even today.
So Exxon's investment makes a lot of sense, because it will align the refinery with future demand, reduce low value products and invest whilst it others are not. It also sends a signal to the market that this is one refinery that is here to stay. Many others will not be so lucky.
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US Ethane and the Death of Gasoline
created: 14 May 2014 12:18
tags: ethane gasoline refinery usa
Last week, the EIA had an interesting blog article about a new form of US export, Ethane:
Mistral Energy confirmed on Friday, May 2, that it has received exports of purity ethane in an inaugural shipment along the Vantage pipeline from the Williston basin in North Dakota, to connect with the Alberta Ethane Gathering System (AEGS) near Empress, Alberta, in Canada.
We already have seen that shale gas has turned the US petrochemical sector on its head. Rising supply of ethane from natural gas, has led to a big change in petrochemical feed stocks and a slew of new investments.
Yet even this will not be enough to utilise all of the new ethane production. So we are seeing investments in export capability. A pipeline to Canada is a fairly simply one, but some companies Enterprise Products to Build Ethane Export Facility on Texas Gulf Coast are even more ambitious.
Enterprise Products Partners L.P. announced today that it plans to build a fully refrigerated ethane export facility on the Texas Gulf Coast.
So ethane exports will be possible to anywhere that has an import capability, and there will be a lot of ethane to export:
We estimate U.S. ethane production capacity currently exceeds U.S. demand by 300 MBPD and could exceed demand by up to 700 MBPD by 2020, after considering the estimated incremental demand from new ethylene facilities that have been announced
So we can expect to see more of these type of investments
There has already been an important project announced for export of ethane to Europe. Ineos, a company with many petrochemical plants in Europe and elsewhere, is one of the partners.
CONSOL Energy Inc. announced today that it has entered into agreement with Ineos Europe AG, part of the Ineos Group, to export ethane via Sunoco Logistics' Mariner East infrastructure and the Marcus Hook Delaware River port for use in Ineos' European cracker complexes.
So what is this going to do to the Naphtha market?
Extracting ethane and exporting it will help gas producers in the US and pet-chem producers in Europe. The one group that will be hurt by this is naphtha producers. Given that Europe is already long on gasoline, and it now faces a new substitute in the gasoline pool, I think we can safely say that this is one more nail in the coffin for Europe's gasoline producers.
As if Shale Oil were not bad enough Shale gas is blowing a typhoon through the world of refining as well.
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The moral case for US oil exports
created: 15 Apr 2014 06:09
tags: exports pipelines refinery usa
I have dealt with the commercial issues surrounding the ban on exports of American crude oil but I think there is another way of looking at the issue as well, ethical considerations.
One thing that always strikes me when I discuss the Middle East with people in Noth America is how easy it is to be hawkish from 10,000 miles away. When sanctions on Iran are discussed in Washington, there are no commercial implications. in Brussels, however, there are. European refineries have lost huge sums of money due to the banning of Iranian crude. The biggest winner has been Russia, who has seen their discounts reduce to nothing.
It is possible that Russia is next in line for sanctions, and once again European companies will bear the brunt of them.
Meanwhile in a parallel universe on the other side of the Atlantic, our alleged ally refuses to sell us their crude oil, even though they have too much. Instead of the champion of freedom that we were always told that America is, they are running a beggar thy neighbour policy, and one that probably even harms themselves.
The USA already has an image problem and this just reinforces the view that it doesn't care about its allies.
So whilst I will agree with any American that thinks European leaders have a tendency to be lily livered, from where we are standing, we are being asked to be tough, and to also pay all of the bill.
