NEW NPRA CHAIRMAN SEES MORE RATIONALIZATION AMONG U.S. REFINERS

The U.S. refining industry is undergoing a minirevolution as it enters another round of rationalization.

That's what Roger C. Beach told the National Petroleum Refiners Association last week.

A senior vice-president of Unocal Corp. and president of Unocal Refining & Marketing Division, Los Angeles, Beach is the newly elected chairman of NPRA. He was elected last week in New Orleans during NPRA's annual meeting.

More than 2,700 industry representatives attended.

MORE TO COME

Beach said the current shakeout involving things such as plant closures and reconfiguration is just the beginning of the next program of rationalization among U.S. refiners. He said it likely will not be limited to small refiners.

Beach predicted U.S. refiners will follow the upstream sector to other shores, where it will be cheaper to produce clean gasoline, and import it.

The Energy Information Administration echoes this in its prediction that increases in imports will occur mainly in products rather than in crude oil.

Beach cautioned that all air basins are not the same, and California Air Resources Board (CARB) Phase 2 gasoline specifications are not the appropriate solution to problems in northeast states. He said those states should be careful about rubber stamping CARB rules.

Beach described a program capable of achieving the same emissions reductions as Phase 2 gasoline at one-third the cost. The program would entail enforcement of federal gasoline standards and a scrapping program for old cars, referred to as "cash for clunkers."

A group of California refiners is discussing how to present the alternate program to California legislators.

C.J. (Pete) Silas, chairman and chief executive officer of Phillips Petroleum Co., described the confusing state of affairs under the Clean Air Act amendments of 1990.

He told NPRA members, "As they contemplate how to react to the law, refiners face a Catch-22 situation.

"To comply in time to meet the law's deadlines, we need to act now. But if we act now, we run the risk of investing scarce capital in the wrong technologies because our friends in Washington have yet to spell out exactly what they want."

Silas cited the conflict between federal, state, and local jurisdictions.

"Washington is demanding that we retrofit our refineries, but local authorities hold up the permits we need to begin construction.

GASOLINE 2000

George Unzelman, president of Hyox Inc., Fallbrook, Calif., predicted these changes in U.S. gasoline composition during the rest of the 1990s:

All but token amounts of light straightrun will be eliminated as a direct gasoline blendstock.
The volume of fluid catalytic cracked gasoline in the pool will drop.
The volume of hydrocracked gasoline will decrease.
The percent of alkylate in the pool will decline.
Reforming severity will be reduced.
Ethanol will not enter the refinery gasoline pool but will continue as a downstream blending agent.
Methyl tertiary butyl ether and tertiary amyl methyl ether could make up 7 vol % of the U.S. gasoline pool.

Unzelman said 450,000 b/d of MTBE capacity is operating, under construction, or planned in the U.S and Canada. That volume, combined with MTBE capacity under construction and planned overseas, should be enough to meet U.S. refinery requirements.

On the other hand, Jamil Wakim of SRI International predicted a U.S. MTBE supply surplus of about 16,300 b/d in 1992 and shortfalls of 81,300 b/d in 1993, 36,000 b/d in 1994, 290,400 b/d in 1995, and 301,900 b/d in 2000. Those shortfalls will have to be made up with imports.

PETROCHEMICALS

Richard Stellman, president of Pace Consultants Inc., summed up the effects of reformulated gasoline on petrochemical markets. He said there will be:

Little effect on ethylene feedstocks.
No serious impediments to the supply of refinery propylene, although the cost of chemical propylene will increase.
Little, if any, effect on supply and cost of butadiene.
A downward trend in benzene prices.

Stellman also said refinery operating parameters will be adjusted so toluene is not produced in current amounts. The chemical market, he said, could not begin to absorb the excess toluene that would result if today's operating modes continued.

"Easy" sources of isobutylene, such as FCC units will be tapped first. This isobutylene will be replaced in alkylation units by propylene and/or amylenes, Stellman said.

He also predicted hydrodearomatization units will operate at high rates, but no new units will be built.

In addition, he sees little problem in meeting world methanol demand in 1995 and beyond. The problem will occur in 1992-95.

Stellman said, "Before passage of the Clean Air Act, there was reluctance to invest in methanol plants dedicated to supplying MTBE plants. Now, there may be insufficient time to construct the facilities."

Stellman also said ethyl tertiary butyl ether's role in the oxygenate market will be small.