US refiners continue to respond to a changed competitive environment with additional investments and aggressive oil product export deals, speakers said during the US Energy Information Administration's 2014 energy conference's opening day.
Flat US demand has made exports more attractive, but feedstocks and regulations continue to matter, "and the industry is deintegrating," Joanne M. Shore, chief industry analyst at the American Fuel & Petrochemical Manufacturers, said during a July 14 session on changing global product trade flows.
"Our surplus has allowed the US to change from a net product importer to a net exporter," Shore said. "Rail has been a tremendous boon in moving crude to refineries. So have pipelines."
Not every US refinery has access to discounted crude, Shore said. Plants in the Midwest and Rocky Mountains have ample supplies, but situations for East Coast, Gulf Coast, and West Coast refineries have not changed much, she said.
Russian competition
US refiners should expect competition as other countries also plan to increase product exports, said a second panelist, Antoine Halff, who heads the International Energy Agency's Oil Industry and Markets Division.
"We see a very large increase in Atlantic Basin product trade," Halff said, adding, "European demand is contracting, but its refining capacity is contracting faster." Looking forward, IEA sees major growth in Russian product exports to Europe—largely residual and bunker fuel now, but growing into other products—competing with US refiners.
A third panelist, Terrence S. Higgins, executive director of global refining and special projects at Hart Energy, said condensate and NGL exports have grown more quickly worldwide than other products.
"The future in the export market is in the distillate streams," he observed. "Gasoline won't be as strong." Higgins also said he sees a need for US refiners to export 250,000-300,000 b/d of naphtha by 2020. "There is a home for it: Asia, which is increasing its stream cracker capacity," he said.
Higgins also said decisions to build more refining capacity in the Middle East and Latin America could be made for social, as well as economic, reasons.
Shore said most US refiners use a mixture of heavy, medium, and light crude. "We're seeing more capacity to use light sweet crude," she said. As for US light, sweet crude production possibly exceeding US capacity to refine it sometime soon, which speakers at the EIA conference raised earlier that day (see story, p. 20), the AFPM official declared: "We're not at the day of reckoning yet."
