FGE’s detailed assessment of the mid/long-term outlook for naphtha sets the stage on fundamental shift occurring within the oil and gas markets going forward – the pivot from transportation fuels into petrochemicals amid the energy transition.
In this study, we forecast naphtha supply and demand globally using bottom-up modelling to explore impacts and trends for naphtha trade and pricing up to 2035.
The first half of 2020 saw the plummeting of crude prices to multi-year lows with the movement restrictions across the globe resulting in the demand destruction of gasoline globally. Naphtha was pushed out of the gasoline barrel within various refining systems (e.g. in the US, Europe, and India), finding a home in the East. Is this a rehearsal for what’s to come?
The 2020s will see radical shifts in the Atlantic Basin gasoline trade of products with refining capacity in the West African region touted to eradicate much of the oil product deficit in the African continent. These will undoubtedly impact gasoline blending margins and refining margins in the West of Suez.
In the East of Suez, we are seeing a radical growth in the deficit of naphtha, largely driven by capacity additions and expansions on olefins in the East Asian and South East Asian regions. With incremental refining capacities in the East through the 2020s largely integrated downstream with petrochemicals units, where will the incremental naphtha come from?
In a world where refineries are increasingly integrated downstream with petrochemicals with the foreseeable decline in transportation fuel demand, how will the cost curve for naphtha-fed projects evolve through the 2020s? How will the pricing and trade of naphtha evolve through the next decade with a weaker pull from gasoline and a stronger pull from petrochemicals?