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Naphtha supply to tighten on lower refinery output

June 29/2020

MOSCOW (MRC) -- Naphtha output is forecast to stay tight into 2021 as destruction of fuel demand caused by COVID-19 curbs refinery throughput and caps supply of the dominant feedstock for ethylene production, according to Premasish Das, executive director at IHS Markit, said Chemweek.

About 75% of naphtha, the feedstock for more than 40% of ethylene produced worldwide, comes from refineries. But refineries do not run based on how much naphtha they want to produce. They run based on how much other key refined products they need to produce, says Das, speaking today at IHS Markits Asia NGLs and Naphtha Conference Online.

The pandemic slashed worldwide demand for refined products including gasoline, jet fuel, and fuel oil by nearly 18 million b/d, prompting refiners to cut throughput by 15-16% in April alone. Some have continued to idle plants or extend scheduled maintenance works, Das says. Gasoline is the most impacted refined product in volume terms and with direct blending accounting for about 30% of global light naphtha demand, the lower blending demand outlook for the second and third quarters of this year has a direct impact on naphtha, he says.

Steam cracking demand for light naphtha, however, is expected to hold up with demand for petrochemicals proving more resilient than transportation fuels. Further support for naphtha is coming from unfavorable liquefied petroleum gas (LPG) cracking economics because of tight gas supply, he notes. The pull for naphtha will continue to be strong from the petrochemical industry," Das says.

Based on IHS Markit modelling, the shortfall in light naphtha supply will continue to grow in the second half of 2020 and peak in the fourth quarter owing to reduced refinery runs and lower production of natural gasoline, he says. While the shortfall is forecast to contract as refiners ramp up runs to meet post-pandemic demand recovery, the deficit in 2021 is still expected to be higher than in 2019, he adds.

One way for refiners to help alleviate the tightness in light naphtha supply is to back blend excess heavy naphtha, used for aromatics production and gasoline blending, into light naphtha, according to Das. Additional heavy naphtha can come from jet fuel optimization, the demand for which will take the longest to recover. Refiners would try to minimize jet production by putting the front, or lighter end, of jet fuel into the heavy naphtha stream, Das says, adding that each refinery runs a different optimization mode.

We remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim.  At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, petrochemistry.
Category:General News
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