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• U.S. Industry Scoreboard 7/22 [72348 bytes]

The rising tide of non-OPEC oil output is altering world crude trading patterns.

The key change is that western refiners have become less dependent on Middle East crude and Asia Pacific refiners more so, says Centre for Global Energy Studies. At the same time, products trading patterns also are changing.

CGES says combined oil output from Latin America and the North Sea since 1990 has risen 5 million b/d to 14.5 million b/d, freeing western refiners to boost short haul crude imports and lower inventory costs. Rising demand in Asia is ramping up prices there of Middle East crudes such as Dubai relative to Atlantic basin marker grades Brent and WTI.

Products markets are changing because refinery expansions and higher operating rates in Asia and Europe are helping those regions become more self-sufficient in products. With Kuwait's refineries restored to pre-Iraqi war capacities, the Middle East is poised to regain its role as a major products exporter, CGES says.

Meanwhile, U.S. products demand is outpacing refinery capacity growth, resulting in growing dependence on products imports.

Total U.S. imports of crude and products in the first half averaged 9,311,000 b/d, up 7.2% from a year ago, says API. U.S. petroleum products deliveries in first half 1996 averaged more than 18 million b/d, up 2.5% from a year ago.

Demand rose for gasoline 0.5% to 7,738,000 b/d, kerojet 5.3% to 1,541,000 b/d, and distillate 3.9% to 3,404,000 b/d, while resid demand fell 0.7% to 850,000 b/d. U.S. refineries in the first half operated at 91.9% of capacity vs. 90.7% a year ago.

More stringent environmental standards also are reshaping world petroleum products trade.

In the West, CGES says, high quality products usually shipped to the U.S. from Latin America may be needed locally as Caribbean countries tighten up gasoline and diesel specs. Conversely, when the European Union limit of 0.05 wt % maximum sulfur content for diesel becomes effective later this year, many Russian gas oil exporters might have to divert supplies to the Asia-Pacific region because most Russian refineries can't meet EU specs.

The European Union Oil Industry Association (Europia) has raised a red flag over a European Commission proposal aimed at cutting sulfur content in motor vehicle emissions to 50 ppm by 2005, phase two of a new round of vehicle emissions curbs EC proposed at the end of June.

Phase one limits-based on a cost/benefit analysis supported by Europe's oil industry (see related story, p. 22) -would trim CO, NOx, unburnt hydrocarbons, and diesel particulate emissions 20-40% by 2000 for new models and by 2001 on all new vehicles.

But Europia Deputy Sec. Gen. Michel Flohic said industry's cost of complying with more stringent phase two sulfur limits, to be debated beginning in 1998 and implemented by 2005, nearly would double to as much as $12.58 billion/year, hastening closures in Europe's refining industry "while doing very little to improve air quality."

Meantime, EC invited auto industry group ACEA to take part in talks on reducing automotive CO2 emissions as a way of eliciting industry's commitment to curb vehicle fuel consumption.

"This is in Iine with community strategy to reduce CO2 emissions from passenger cars and to improve fuel economy," an EC official said.

A U.S. DOE official says rising U.S. oil imports and unstable conditions in Persian Gulf countries are good reasons why Congress should be more supportive of nonoil fuels such as gas, electricity, and domestic renewable biofuels. Remarks by Assistant Sec. Christine Ervin came in a recent letter to the Washington Post at a time when Congress is preparing to vote on funding for renewable biofuels in energy and water appropriations bills.

Ervin said Congress in the wake of the 1991 Persian Gulf war increased funding of federal efforts to curb U.S. oil import dependence. As a result, DOE hiked spending on efforts to cut oil and gas finding costs and develop high mileage, alternative fuel vehicles (AFVs).

Also, the Clinton administration is working with U.S. automakers to develop an 80 mpg, virtually pollution-free family car by 2004. But Congress last year cut $20 million from federal spending on AFV research. DOE estimates the U.S. oil trade deficit will double by 2000 to $100 billion/year, while global dependence on Persian Gulf oil could surpass the previous high of 67% in 1974.

After 2 months of lukewarm interest, U.S. refiners are lining up to buy oil from the Strategic Petroleum Reserve.

DOE is closing Weeks Island SPR site, and Congress has ordered it to sell $227 million worth of the sour crude stored there. Sales so far have totaled more than $126.2 million for 6,895,000 bbl, half in the past two sales. Last week, five companies bought 2.96 million bbl for August delivery at $18.13/bbl. In the week prior, bidders bought 450,000 bbl. Successful recent bidders for SPR crude were Koch, Ashland, Citgo, Coastal States, BP, Basis Petroleum, and Mobil.

Texas Railroad Commission Chairwoman Carole Keeton Rylander in July 23 testimony before the U.S. Senate Energy Committee is expected to call for Congress to shut down DOE and return the research component in the agency's $17 billion budget to states in the form of block grants.

"I believe the DOE has no mission, no impact, and no legitimate future and ought to be abolished as soon as possible," Rylander said last week in Austin.

Rylander supports a Senate bill proposing to eliminate DOE that proponents say, if passed, would save U.S. taxpayers $20 billion the first 5 years and $5-7 billion/year thereafter.

A heightened emphasis on E&P safety in the U.S. (see related story, p. 23) stands in grim contrast to a deadly blowout last week in Texas.

Firefighters from Joe Bowden's Wild Well Control Inc. at presstime still were fighting to contain a fire that had raged out of control for several days after a July 13 blowout at a horizontal well site near Dime Box, Tex. Two men were believed killed, but intense heat from the blaze allowed crews to recover only one body. TRC's Rylander called for a full investigation of the blowout.

Industrial Gas Technology Commercialization Center (Igtcc), Arlington, Va., has launched a campaign spearheaded by natural gas and manufacturing companies to speed acceptance in North America of gas driven air compressors (GDACs).

The program aims to tell prospective customers about cost savings possible with GDACs, help group members and equipment distributors coordinate marketing, and expand marketing and service networks supporting GDAC sales. Included in the plan are demos to show advantages of GDACs and access to financing and leasing support.

Igtcc says standardization and new engine controls already are improving GDAC reliability and cutting costs. The group aims to capture 1.5% of the air compressor market by 2000, prompting incremental gas sales of 3 bcf/year. About 11,000 electric air compressor systems are sold annually in the U.S., mostly rotary screw units larger than 50 hp.

India will suffer gas shortages until at least 2010 because of a domestic production shortfall, and LNG imports are the most practical solution, says Wood Mackenzie, Edinburgh.

Proposed gas pipelines from Oman-through which India expected to receive about 20 billion cu m/year of gas-Iran, and Bangladesh likely won't be built because of high costs, engineering difficulties, and geopolitical problems.

"Because of this," said WoodMac, "we expect that India will start importing LNG between 2000 and 2005, with volumes building to 12 billion cu m/year by 2010."

If requests for connections to the state gas supply firm could be met, demand in India would reach as much as 96 billion cu m/year in 2000 from the current 18 billion cu m/year. However, India's producing gas fields at current output of 25-30 billion cu m/year have a life of only 27 years.

With future development, India's gas output could reach 34 billion cu m/year by 2010. WoodMac says LNG imports will build rapidly beyond 2000, lifting India's total gas supply to 46 billion cu m/year.

East Asian ethylene, propylene, and benzene consumption by 2005 will account for more than one third of world demand for the products, if regional use jumps 10.5%/year, as expected by Chem Systems, Tarrytown, N.Y.

"With many projects planned in the next several years, about half of the world's new capacity will be built in Asia," Chem Systems said.

Asian ethylene capacity is expected to keep up with demand, but propylene shortages are likely to develop despite new plants in South Korea, Malaysia, and Thailand and increased recovery of refinery propylene. Benzene shortages should peak at about 850,000 metric tons/year by 1998, the company said.

Copyright 1996 Oil & Gas Journal. All Rights Reserved.