Whole Lotta Splittin’ Going On – The Market for US Gulf Naphtha from Condensate Splitters

New and proposed projects to build condensate splitters along the Gulf Coast – including the first one due online at Kinder Morgan’s Galena Park facility in Houston this June, will output more than 60 percent naphtha. Unlike most refineries, stand-alone condensate splitters have little flexibility of feedstock or outputs so their economics rely on finding strong demand for naphtha. Today we discuss possible sources of naphtha demand.

This blog is a second follow up to the RBN Drill Down report titled Like a Box of Chocolates – The Condensate Dilemma which examines major developments in the world of condensates for the past few years and looks forward through 2018.  The analysis begins with an overview of the condensate family, including field condensate, natural gasoline and naphtha.   The remainder of the report then reviews (a) field condensate production forecast by major basin, (b) the supply/demand balance for natural gasoline, (c) Gulf Coast condensate splitter infrastructure and projects, and (d) a special spotlight on Utica condensate supply and infrastructure development.  More information on this report is available here.  Drill Down reports are part of the RBN Backstage Pass premium services package (see the Ad below).


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Today’s post continues our blog series on infrastructure being developed to process and transport increasing volumes of condensate. We started that series by describing how refiner Marathon Petroleum (MPC) plans to process lighter crude in their refineries in Canton, OH and Catlettsburg, KY and to construct condensate splitters at both facilities that will process 60 Mb/d between them (see Whole Lotta Splittin’ Going On). Then we turned our focus to similar plans to construct condensate splitters and specialized processing capacity to handle very light crude at Gulf Coast refineries and terminals (see Processing Gulf Coast Condensate). And in the previous episode in the series we examined the economics of operating condensate splitters on the Gulf Coast (see Condensate Splitter Economics). Condensate splitters are basic distillation units that produce at least 60 percent yields of naphtha. This episode looks at the markets for naphtha from Gulf Coast condensate splitters.

We start with a recap on condensates and condensate splitters for those new to the topic – skip this paragraph if you are an old hand. Condensates are light hydrocarbons containing a significant percentage of naphtha range materials.  There is no universal standard for what defines a condensate, but 50 degrees API gravity is typically used to differentiate condensates from light crude oil (see Fifty Shades of Condensate Which One Did You Mean?). Field condensate, also called lease condensate is produced at or near the wellhead, typically from stabilizer units.  Plant condensates, more commonly known as natural gasoline, are part of the NGL stream from natural gas processing plants and produced from fractionation facilities as a ‘purity’ NGL product (a.k.a., pentanes plus or C5) - (see Like A Box of Chocolates – The Condensate Dilemma). Lease condensate is typically processed in refineries by blending it with other crudes or using topping units to remove the lighter hydrocarbons. Condensate splitters are stand-alone distillation units that produce blending components such as naphtha and gasoil that require additional processing and additives to make finished products like gasoline and diesel.

Since condensate splitters mostly output naphtha, any company that runs one needs to find a market for naphtha if they are going to be successful. This challenge will face the owners of the four currently planned condensate splitters that we described in Processing Gulf Coast Condensate. There are basically three sources of demand for naphtha in the US market. These are petroleum refineries, diluent to reduce the viscosity of heavy Canadian crude and petrochemical cracker plants. We will discuss each in turn.

The first is as a feedstock for refiners to use as part of the gasoline blending pool. We have previously described the basic operation of a complex refinery and how gasoline blending involves multiple components mixed into different recipes of finished gasoline (see Complex Refining 101 – Upgrading and The Octane Boost in Gasoline Blending). Naphtha on its own is one of those gasoline blending components but it is often processed through a reforming unit first to make a product called reformate that has a higher octane level than “raw” naphtha. Refiners have also traditionally been major purchasers of  plant condensate (or C5 or natural gasoline) produced by a natural gas liquids (NGL) processing plant to add to the gasoline blending pool. However as we have also discussed previously, because the US shale crude revolution has produced a surfeit of ultra light crudes with a lot of condensate range components, US refiners in the Gulf Coast region are needing to buy less and less additional naphtha or plant condensate to meet their gasoline blending needs because they are getting all the naphtha range material that they need from their crude feedstocks (See The Condensate Dilemma). It should be noted that this not only applies to refineries processing light sweet shale crudes (which have an increasing amount of naphtha) but also refineries processing heavy crudes from Canada because the latter are diluted with condensate “diluent” so that they can be shipped to the US in pipelines. That diluent provides refineries with as much naphtha range material as they need – often too much. As a result US refinery demand for incremental naphtha range materials for the gasoline blending pool is declining fast and therefore unlikely to prove a ready home for naphtha produced from condensate splitters.

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