Edward J. SwainMethyl tertiary butyl ether (MTBE) production by U.S. merchant and captive producers was at its highest level in 1998.
Imports of MTBE into the U.S. were also at their highest levels in the past year.
Offsetting high levels of production and imports were low MTBE prices throughout all of 1998. MTBE prices follow gasoline prices, and crude oil and gasoline prices were at a record low level during 1998.
As crude oil and gasoline prices appear to be on the rise during the early months of 1999, MTBE prices may improve.
The future of MTBE is uncertain, however, as the governor of California in March issued a phasedown on the octane-boosting gasoline additive that will eventually eliminate it from fuel.
MTBE's futureThe future of MTBE as a leading choice of oxygenates in U.S reformulated and oxygenated gasolines may not be bright. California Gov. Gray Davis issued an executive order on Mar. 25, 1999, banning the use of MTBE in gasolines sold in the state by Dec. 31, 2002.
The governor requested the California Environmental Protection Agency to implement the executive order and the California Energy Commission and the California Air Resource Board to devise a timetable for the removal of MTBE by 2003 (OGJ, Apr. 5, 1999, p. 39).
The request is a step toward the eventual prohibition of MTBE use in the state and not a definitive decision.
A number of issues are raised if other oxygenates are recommended to replace MTBE in California's gasoline. These issues include:
- Oxygenates availability
- Summer volatility specifications
- Smog-reduction capability.
The timetable for phasing out MTBE from the California market could be as long as 5 years. If MTBE is phased out of California, other states may seek oxygenate waivers, which jeopardizes the business of domestic and international merchant MTBE producers.
ProductionU.S. MTBE production from 1989 to 1998, as reported by the U.S. International Trade Commission and U.S. Department of Energy (DOE) Energy Information Administration (EIA), is shown in Fig. 1 [46,104 bytes].
Production for the period of 1989-1992 was flat, averaging about 102,000 b/sd. In 1995, MTBE production increased to 180,700 b/sd mainly as a result of the U.S. reformulated fuel program, which began in Jan. 1, 1995.
The MTBE production rate was at its highest (227,300 b/sd) in 1998. Future rates will depend on several issues:
- Health aspects of MTBE
- Its entry into aquifers
- Innovative ways to reduce volatile organic compounds (VOCs) from mobile sources
- Ethanol share of reformulated and oxygenates gasoline markets.
The majority of MTBE production comes from producers in PADD 3.
There are about six merchant producers who use isobutane dehydrogenation technology to manufacture MTBE. Several others produce 50-55% of U.S. MTBE by other chemical-processing technologies.
Outside of merchant production, the remaining MTBE production comes from petroleum refineries and ethylene plants.
ImportsAbout 88,500 b/cd (1.35 billion gal) of MTBE, valued at $840.6 million, was imported into the U.S. in 1998.
The majority of the imports entered through several East Coast (PADD 1) and West Coast ports (PADD 5). Table 1 [36,178 bytes] shows the import distribution.
An average of 26.2 million gal/month was imported into PADD 1 during 1998. A peak volume of 45.1 million gal was imported in May, and the lowest monthly volume of 7.1 million gal was imported in August.
Prices of imported MTBE in PADD 1 started the year at $0.71/gal then dropped to $0.56/gal in April. The price stayed in the upper $0.50s to lower $0.60s/gal during the next 6 months. The price decreased to$0.54/gal in December.
In PADD 5, an average of 86.2 million gal/month of MTBE was imported in 1998. There was a peak volume of 146.2 million gal imported in April. The lowest monthly quantity, 51.2 million gal, was imported in October.
Prices of MTBE in PADD 5 started 1998 at $0.74/gal in January. In May, the price had dropped to $0.60/gal. The price in this district fluctuated between $0.58 and $0.72/gal during the next 6 months and closed the year at $0.51/gal in December.
Imported MTBE plays a major role in meeting reformulated and oxygenated gasoline markets in PADDs 1 and 5 because there is limited local MTBE production in these two districts.
U.S. MTBE production is concentrated in PADD 3. Reformulated and oxygenated gasoline markets in PADDs 2, 3, and 4 receive their MTBE requirements from PADD 3 merchant producers.
Table 2 [124,023 bytes] lists the major international sources of MTBE imported into the U.S. during 1998. The nine largest supplier countries of MTBE accounted for 97% of the imported MTBE in 1998. Seven other countries supplied the remaining quantities (945,000 bbl) of imported MTBE to the U.S.
Alberta Environfuels Inc.'s MTBE plant in Edmonton, Alta., is the only merchant producer in Canada. It appears that the plant's total output is imported into the U.S., mainly through PADD 5.
Dubai National Gas Co.'s MTBE plant came online during the second quarter of 1995. Like Alberta Environfuels, Dubai National Gas appears to have slated its entire plant output for the U.S. market.
Saudi Arabia is a world leader in MTBE production. The country's four producers have a production capacity of 85,660 b/cd, 33% of which enters the U.S. market.
Saudi Arabia's producers are low-cost operators with a captive supply of natural gas, butanes, and methanol. The country's producers also have access to low freight-cost chemical tankers.
Exports and pricesAbout 18,800 b/cd (363 million gal) of MTBE, valued at $249.6 million, were exported from the U.S. in 1998.
Most MTBE left the U.S. via the Texas Gulf coast ports in PADD 3. Minor quantities were exported from PADDs 1, 2, and 5 (Table 3 [36,267 bytes]).
The U.S. exported MTBE to 17 countries during 1998. Exports to four countries, Mexico, Venezuela, Jamaica, and Canada, made up 97.9% of U.S. exports (Table 4 [48,996 bytes]).
Mexico, Canada, and Venezuela have their own production facilities. In fact, Venezuela and Canada are major suppliers of MTBE to the U.S.
Fig. 3 [56,458 bytes] tracks the spot prices of MTBE in 1998.
MTBE spot prices were about $0.75/gal at the beginning of 1998. The price gradually fell until it reached at $0.54/gal on Mar. 20.
The price closed at the end of the year at about $0.44/gal.
Edward J. Swain is an independent consultant in Houston. He is retired from Bechtel Corp., where he was a process planning engineer. Before joining Bechtel, he worked for UOP and Velsicol Chemical Corp.
Swain holds a BS in chemical engineering and an MS in business and engineering administration, both from the Illinois Institute of Technology in Chicago.
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