Some Key Issues Since late 2003, when world oil prices began to steadily rise, markets have become ever more concerned over tight supply and increasingly heavy and sour crude output. Refiners have been squeezed by slate choices that have become ever less suitable to produce a higher proportion of mid-weight and light products. Condensate may well prove out to be at least part of the solution to refiners' growing slate problems. Condensate is one of the two groups that make up Natural Gas Liquids, and has finally come of age in world trade, marketing, refining, and petrochemicals. Condensate trade and use has moved from a specialty commercial activity to the mainstream of refining and base petrochemicals and nowhere is this more evident than in markets East of Suez. It is likely that Asia Pacific and the Mideast Gulf will remain the focus of demand growth, both for oil products and petrochemicals, into the next decade. The protean nature of condensate makes it an ideal feedstock for a wide range of sectors. It is used as a refinery slate component; it is run exclusively as processing feed in special-built distillation towers called condensate splitters. Condensate is a major source of petrochemical feedstock, in direct feed to ethylene crackers or when processed in pretreatment units or splitters first; it is a basic building block for gasoline production and blending, and acts as a substitute for gas in turbine power generation. It can be defined as a base material, a blending component, a feedstock, or as a boiler feed. It is the very flexibility of condensate - and the many names and definitions that are common for condensate in the oil industry - that has led to confusion among potential buyers of this material and in a sense has undervalued this equivalent of light, sweet crude. Refiners with simple or moderate-sophisticated plants will come to regard condensate as a valuable balancing component in their slates, when taking a higher percentage of heavy, sour crudes. We see condensate coming increasingly into its own as a valuable refining and petrochemical feedstock in coming years. Expanding gas production in the Mideast Gulf will underpin a ballooning of condensate and condensate-derived naphtha production in that region. Asia Pacific too will undergo a steady expansion of gas projects and parallel condensate output, but will absorb most condensate within regional markets. It is notable that rising Engineering, Procurement, Construction (EPC) cost have cancelled many proposed refinery projects and delayed many more. Expansion of gas capacity has too been afflicted by rising costs, but in contrast, projects have tended to be delayed somewhat, not cancelled outright. The steady buildup of condensate output will continue through the middle of the coming decade. Condensate East of Suez focuses on the growing inter-relationship of gasoline, road diesel and petrochemicals, as impacted by sharply rising condensate output and processing. Condensate splitters will have an increasing role in supplying incremental gasoline supply to meet spiraling Mideast Gulf demand. Direct-feed use of condensate, together with condensate-derived naphtha will make up a rising proportion of Asia's petrochemical feedstock needs, with some markets such as China depending on it to ease a looming light products supply squeeze. NEW DEVELOPMENTS PRODUCTION The structural shift to accelerated development of gas reserves has become ever more apparent in recent years, as East of Suez countries seek to transform gas reserves into new base energy supply. More subtle, but ultimately as far reaching, has been a growing awareness of the value of condensate as a segregated and separate sales item from gas. In some markets companies are building condensate strippers and petrochemical plants near emerging gas production centers, simply to take advantage of future potential segregated condensate supply (China); in other markets promoters are moving to produce solely NGLs and re-inject gas for later use in LNG or piped gas projects (Australia; the UAE) and finally, in many markets where condensate was stripped solely to fill out the volume of crude pools through spiking, output is now segregated and sold separately (notably in Indonesia). LNG project developers have noted that NGL recovery positively impacts the rate of return on project capital and have integrated condensate production into their field planning. It should be noted that condensate, unlike Liquefied Petroleum Gas (LPG) counterparts propane and butane, does not require specialized storage and transportation structure for commercial sales. MARKETING AND TRADE New production grades are emerging in many markets and new condensate exporters are likely to make their debut in Myanmar, India, Australia, Yemen, Iraq, and possibly Kuwait. Long-Haul arbitrage for condensate sales east has grown for West of Suez producers in Nigeria, Equatorial Guinea, Egypt, and Algeria. We believe it will only be a matter of time before Peru begins regular export of condensate to Asia, while Canadian syncrude producers are sourcing long-haul condensate barrels from distant markets to aid export of bitumen-based production to Asia-Pacific buyers. CONDENSATE PROCESSING/UTILIZATION There has been a continuing upsurge in condensate processing capacity, both splitter and petrochemical pre-treatment units, with the short-term wave of expansions due by 2009 in the Mideast Gulf (Iran, Qatar, Saudi Arabia, the UAE and possibly Oman) but in the medium term continuing in Asia Pacific (Australia, China, Malaysia, Thailand, and possibly Vietnam). Qatar's condensate strategy has been of particular interest, as state Qatar Petroleum (QP) plans to add a second grassroots splitter in its home market, while proposing a 200 MBD complex within a grassroots refinery project in China ¡V with all condensate supply to come from the Mideast Gulf. PRICING A proliferation of traded grades has helped to broaden the number and range of pricing systems used to market condensate. Traditionally refinery buyers preferred crude-linked prices; petrochemical users, above all focused on feedstock values, naphtha-linked pricing. Yet both condensate sellers and buyers have broadened their options. Flexibility has become a trend, in particular among condensate exports, with sales adjusted according to sector and geographic region. We believe a global condensate market is emerging, which though small in volume compared to world crude or products trade, will expand rapidly into the coming decade. This will prompt immense changes in East of Suez gasoline, petrochemical, and middle distillate balances. Click here to see Table of Contents. Click here to see Charts and Graphs. Click here to see the biography of Al Troner. If you would rather purchase this product on CD, go to our Order Form to purchase. |
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| Multi-User Corporate License - Condensate East of SuezThis version of the report can be utilized by all people within your company at all locations. |
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| Condensate Supply by FieldHistorical Statistical Module 1997 thru current. |
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| Condensate Demand by SectorHistorical Statistical Module 1997 through current. |
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| Condensate Splitting & Petrochemical PreTreatment Capacity & Condensate ExportsHistorical Statistical Module 1997 through current. |