Growth in production of light hydrocarbons combines with shifting patterns of oil consumption and new transportation options to reshape the refining industry's future.
Rising production of biofuels, especially ethanol, receives much public attention because of the international political push for petroleum substitutes produced from renewable materials.
Less noticed but volumetrically more important is rapid growth in supply of natural gas liquids, especially from members of the Organization of Petroleum Exporting Countries.
The International Energy Agency expects NGL supply from OPEC producers this year to average 5 million b/d. That's down by 600,000 b/d from what IEA was projecting for the year at the end of 2008 due to project delays and cuts in production of associated gas.
But it's still 1.5 million b/d above OPEC's NGL production at the start of this decade and, coupled with condensates, biofuels, liquids from coal and natural gas, and NGLs from outside OPEC, an important and growing segment of total liquids supply.
Light hydrocarbon liquids are not, however, the same as crude oil. Unless blended with crude, they don't normally charge refinery stills. And they mostly yield gasoline.
James Burkhard, managing director of the Cambridge Energy Research Associates (CERA) Global Oil Group, sees in these distinctions major implications for refiners.
At CERA's annual energy conference in Houston, Burkhard predicted that production of light hydrocarbons will grow while that of crude oil flattens.
The trend will raise supply of gasoline. Demand growth, though, will be stronger for middle distillates, which still require crude.
Over time, therefore, Burkhard sees margin strength for distillate and the opposite for gasoline. And he expects refining investments to focus more on conversion and less on crude capacities.
Furthermore, he told the CERA conference, hydrocarbons might not account for as much of future transport fuel supply as generally is believed. The mobility needs of people in populous, developing countries might instead be met by mass-produced, low-cost, light electric vehicles likely to emerge in the next 10 years.
Citing forecasts that the industry will have to supply 120-130 million b/d of oil by 2030, Burkhard said, "We frankly may not need it."
(Online Feb. 13, 2009; author's e-mail: email@example.com)