Australia in sweet spot to meet Asia's demand for ultra-light oil
SINGAPORE, June 22 (Reuters) - Australia is in pole position to capture a bigger piece of the growing Asian condensate market, with producers pumping new supplies of the ultra-light oil as natural gas output soars to feed the nation's mega LNG projects.
An Australian wave of LNG supply has helped pull Asian LNG prices down by 75% since 2014 , so selling more lucrative condensate to Asian buyers could give a lifeline to less profitable projects.
Australia's Ichthys LNG export project, for instance, operated by Japan's Inpex Corp, could produce more than 100 Mbpd of condensate when it starts up next year.
"The fact that the project is liquid-rich is one of the reasons that this project is economically in good standing," an Inpex spokesman said, adding that the company has started marketing its condensate, primarily to customers in Asia.
Condensate is a light oil produced in association with natural gas, and its consumption is rising across Asia as new refineries or splitters come online to meet strong demand for it to be used to make the chemical feedstocknaphtha. (See below for a table of new splitters in Asia.)
Besides Inpex, Chevron Corp plans to produce 20 Mbpd of condensate once it ramps up its Gorgon LNGproject on Barrow Island off the northwest coast of Western Australia.
The circle of condensate suppliers is small, though, and Australia has the inside track on selling to Asia, especially with some Middle East producers building their own splitters.
"The outlook is quite pessimistic (for buyers) as sweet condensate supplies are very limited," said an Asian oil buyer who declined to be named due to company policy.
Qatar, a traditional exporter to Asia, plans to divert a third of its output to its own splitter by January.
Rival producer Iran could fill some of that shortfall, and it has stepped up exports to South Korea following the lifting of sanctions against Tehran, hitting a record in June.
Quality issues with Iran's condensate, however, limit its attraction to buyers. The outlook on its supplies is also murky on delays in the startup of its splitter projects and a ramp-up of production from its South Pars field.
Premiums for Qatari condensate loading in February hit a record, but have since fallen back on weak naphtha margins. The rise in condensate use as splitters start up from September could drive premiums higher again, traders said.
CUTTING ASIA NAPHTHA SHORTFALL
Asia's petrochemical makers are net short of naphtha, although that deficit is expected to fall as much as 5.5% next year to 5.2 MMt/month to 5.3 MMt/month, according to Premasish Das, director for Asia and Middle East downstream oil markets at energy consultancy IHS.
The drop will come as condensate splitters that were planned a few years back to capture growth inpetrochemical markets come online in Asia to feed adjacent paraxylene units.
Combined condensate supplies from Ichthys and Gorgon of almost 140 Mbpd will initially meet a rise in Asian splitter capacity of 160 Mbpd in Taiwan and South Korea between late 2016 and early 2017.
Two more splitters, one in Singapore and one China, are also set to restart following unplanned outages, and at some point will add back another 190 Mbpd in condensate demand, tightening the market for the light oil.
That means Asian naphtha buyers will take up less of a current global surplus, further undermining profit margins for the light oil product.
Benchmark Singapore naphtha refinery margins from refining a barrel of Brent crude, have already tumbled more than 60% since the beginning of the year to around $54/t on June 21.
Reporting by Florence Tan and Seng Li Peng in SINGAPORE; Additional reporting by Osamu Tsukimori in TOKYO and Hyunjoo Jin in SEOUL; Editing by Henning Gloystein and Tom Hogue
CONDENSATE SPLITTER PROJECTS IN ASIA & MIDDLE EAST
Company Location Capacity, '000 bpd Startup date
Qatar Petroleum Qatar 146 August
Hyundai Oilbank South Korea 110 October
CPC Taiwan 50 End 2016-early 2017
Persian Gulf Star Phase 1 Iran 120 September
Jurong Aromatics* Singapore 100 Waiting for regulatory approvals to restart
Dragon Aromatics* China 90 Indefinite
**plant restart
SPLITTERS IN OPERATION
Company Location Capacity, '000 bpd
Hanwha Total Daesan, South Korea 150
SK Energy Incheon, South Korea 140
Tasweeq Ras Laffan 146
Sinopec Tianjin, China 50
Shell-CNOOC Huizhou, China 85
TPPI Tuban, Indonesia 100
Saudi Aramco Ras Tanura 225
ADNOC Ruwais 280
ADNOC Umm al Nar 150
ENOC Dubai, UAE 120
Vitol Fujairah, UAE 80
PTT Aromatics Rayong, Thailand 135
S-Oil Onsan, South Korea 85
Sinopec Shanghai, China 65
Total 1811
Comments