Description

Numerous legislative and regulatory initiatives in the U.S. have recently been proposed that are expected to greatly affect the future demand for MTBE. A reduction in MTBE use could result in a significant octane shortage in the U.S., which would impact propylene and aromatics pricing due to the traditional relationship between octane values and the pricing of these petrochemicals. This report reviews the key factors affecting the use of MTBE and the pricing of propylene and aromatics, and provides an assessment of the potential impact of higher octane values on propylene and aromatics pricing. In particular, the report: Reviews the regulatory developments affecting the use of MTBE and the resulting outlook for the MTBE market in the U.S. and globally Reviews gasoline blendstock options available to compensate for a reduction in MTBE use in gasoline Presents the cost of producing octane from the key technical options available to refiners Reviews historical market valuations for octane and describes the price setting mechanisms for octane values Profiles the U.S. gasoline pool and describes changes expected to result from lower MTBE use Describes the linkage between octane valuations and pricing for propylene and aromatics Estimates changes to propylene and aromatics pricing that could result from higher octane values that could occur due to a reduction in MTBE use. MTBE now accounts for about 3.5 percent of the U.S. gasoline pool. Thus, any regulatory changes that remove or substantially reduce the MTBE content of U.S. gasoline will have a major impact on the U.S. gasoline pool. Due to its high octane and the absence of significant volumes of other high octane streams with MTBE's other desirable properties, as U.S. MTBE use is phased out, compensating for its loss in octane is expected to be the most significant challenge for U.S. refiners. Since nearly all the MTBE now used in the U.S. gasoline pool is contained in RFG, any regulatory changes that remove or substantially reduce the use of MTBE will primarily affect the RFG pool. Each refiner is likely to adopt a different strategy to replace MTBE, with the specific configuration and capabilities of existing processing facilities influencing its selected strategy. Chem Systems expects that the strategies that will be adopted will be a combination of: Increased ethanol use Operating cost increases, such as higher reformer severities Capital investments in new refinery and terminal facilities Supply alternatives, such as increased purchases or imports of RFG and/or blendstocks In addition to increases in the ethanol content of the RFG pool, other changes that are expected to be made to RFG blends include: Increases in the content and octane of reformate in RFG blends Reductions in low octane naphtha streams Increases in isomerate, alkylate and iso-octane contents Reductions in benzene and/or sulfur content Nexant Chem Systems Merge Nexant, Inc., a leading provider of technology solutions and experienced-based technical and management consulting services to electric utilities, energy producers, oil and gas companies, governments, and energy end-users worldwide, has recently acquired Chem Systems. This acquisition, combining our services and products, allows us to span the full range of power, oil, gas, refining, petrochemicals and specialty chemicals sectors and provide our clients with a broader base of services in the energy and process industries.