NGL growth takes toll on global refining sector

At a minimum, US natural gas liquids (NGL) plant production will add about 525,000 bpd to global oil supply, and the rest of the world will add another 350,000 bpd between now and the end of 2015, according to the recently-released Global Crude Oil Outlook from consultancy ESAI Energy.

The primary implication of growing NGLs is that they further limit the call on OPEC crude, the group says. At the same time, the growth in NGL plant output means end-use consumption depends less on receiving supply from refinery operations.

The production of ethane, LPG and plant condensates (pentanes plus) from gas processing can replace the demand for LPG or naphtha from refineries. For example, new ethylene cracker capacity around the world may either be geared to run ethane or have the flexibility to switch between ethane, plant LPG and naphtha.

Likewise, pentanes plus can replace naphtha as a crude oil diluent.  And of course, plant LPGs may compete with refinery LPGs. The contribution of gas processing to “oil” supply is somewhat akin to the growth in alternative fuels, which have replaced refinery-derived transport fuels.

As a result, global refinery throughput growth will increasingly not track global “oil” demand growth, making refining profitability even more elusive.

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