CEH Report

Table of Contents

Abstract

Naphtha and gas oil have two basic uses—as the primary component in the production of gasoline and fuels and as a feedstock for the production of olefin and aromatic petrochemical products. This report covers the supply/demand situation for naphtha and gas oil in North America, Western Europe, the Middle East and Asia, with a special emphasis on the availability of these hydrocarbons for the production of chemicals.

The chemical uses of naphtha include use as a feedstock for steam cracking to produce petrochemicals (ethylene, propylene and pyrolysis gasoline) and input to catalytic reforming to produce reformate for gasoline blending stock and BTX (benzene, toluene and xylenes) extraction. Gas oil is used as a chemical feedstock for steam cracking, although it is generally preferred less than naphtha and natural gas liquids (NGLs, including liquefied petroleum gas [LPG]), as its use depends primarily on feedstock and ethylene coproduct pricing structures.

Despite steady global petrochemical demand over the past ten years, the recent economic recession resulted in declines in petroleum liquid feedstock consumption in developed regions. Between 2006 and 2009, North America and Western Europe experienced a 1–2% average annual drop in naphtha and gas oil consumption on weakened derivative demand and record crude oil pricing, forcing a shift to more economical feedstocks. In contrast, the Middle East and Asia enjoyed 3–5% average annual growth during the same period on continued economic growth and new derivatives plant construction, despite the downturn and corresponding start-up delays. Japan experienced slight growth during the same period, particularly in gas oil chemical consumption, benefiting from regional activity.

The following pie charts show world consumption of naphtha and gas oil.

The gasoline market plays different roles in each of the regions. Gasoline is the dominant end use for naphtha in the United States and Western Europe. In the United States, gasoline demand is the primary reason petroleum is processed. It also determines the use of other refinery fractions; for example, much of the straight-run gas oil fraction produced in U.S. refineries is upgraded into lighter components in downstream processes, such as catalytic cracking. In Western Europe and Japan, gasoline accounts for a smaller portion of the crude petroleum processed because refineries in these regions have traditionally emphasized the middle distillates—heating oils and diesel fuels. In the rest of Asia and in the Middle East, where there is less demand for gasoline, paraffinic naphtha is the dominant steam cracker feedstock, primarily for olefin production. However, as gasoline demand increases globally, demand for aromatic naphtha in the gasoline pool will increase.

Gas oil is predominantly used in the fuel markets. In the United States gas oil is consumed in refining processes to produce gasoline blending components. In Western Europe and Asia, little upgrading of gas oil is done (compared with the United States). Increased production from Fischer-Tropsch-based gas-to-liquids projects may replace some gas oil fuel demand in Western Europe and Japan.

During 2009–2014, demand for naphtha and gas oil for petrochemical use is projected to increase at around 2.8% per year for the regions covered in this report. Demand growth will be most evident in Asia and the Middle East, although new ethylene capacity there will be based largely on natural gas liquids. Recovery in North America and Western Europe will be slow as refiners adjust to rising crude oil prices and derivative producers adjust capacities relative to future demand growth.