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Video: Naphtha’s reemerging role as an essential product and feedstock

21 May 2019

Watch, Premasish Das, Executive Director, IHS Markit discuss the role of naphtha markets today and if it will ever reach the level of its past.

In this video Premasish Das will review questions on:

  • What role does naphtha have in the market today?
  • Will naphtha markets ever reach the level of it's past?
  • What should we monitor for long-term impact?
  • What key trends should we consider moving forward?


What role does naphtha have in the market today?

I think that's a great question. If you look at naphtha it still is a very important feedstock and almost 40% of the total world's ethylene production is based on naphtha. But if you just look back the start of this decade, that number was more than 50%. What has happened is in-between, because of this tight oil and the shale gas revolution in the US and more and more so called "alternative feedstocks" has generated ethane, propane, butane - and they eventually take a larger share. Naphtha is very important still today, but it was more important in the past, I would say.

Will naphtha markets ever reach the level of it's past?

The way I see it naphtha will continue to be important feedstock. From the way we see the US production, the tight oil and the shale gas production is likely to increase from now to maybe mid of the next decade. And after that, it is likely to slow down- the growth will be slower. In that kind of situation, the alternative feedstock availability would be a question at that time, then demand for naphtha to meet the petrochemical feedstock will be rising so the importance of naphtha will reemerge. I think eventually it will again increase to a level of whatever we have seen in the past.

That's why we are doing a study, a naphtha study, to look at how the world will look like from the petrochemical feedstock point of view. Like- How much naphtha we need, how the demand will look like, where will the supply come [from], how the trade balance will change, what will be the implications on the pricing - all those things we're trying to cover, consider and develop as part of that study.

What should we monitor for long-term impact?

I think there are quite a few uncertainties over here. The first thing is, as I mentioned, the US tight oil or the shale gas production - how the outlook will change, how long and how much that can increase. I think that is one of the things we need to really watch out.

Second thing that is very important is the petrochemicals of demand itself. We are hearing about lot of plastic sustainability and other aspects. So, with that - how the demand will change and how the oil price or the global economic condition will also impact the demand. I think that is one of the things we need to watch out, particularly in the short to medium term.

And finally, I think we need to look at how the refiners are behaving, how they are adopting a kind of different, I would say the demand pattern, like the refined products demand is likely to decline whereas the petrochemical demand is likely to increase - how they're trying to match these two profiles and how they're going to change their operating of conditions. I think those other things we really need to look at to evaluate in the long term.

What key trends should we consider moving forward?

Well, I think one of the key trends is essentially the integration and production of more naphtha. I think the way the refiners are operating today, the so-called business as usual if I say, is not going to help the process. So, it needs something more like more integration so that they can produce more feedstock for the petrochemicals. Or maybe second new technologies like the crude-to-chemicals what we have been hearing now. So, like in China maybe in even Saudi Arabia - those kinds of facilities that can produce a lot more chemicals using directly from the crude. I think those other things to really consider going forward.

Our Light and Heavy Naphtha Service provides comprehensive global naphtha market analysis to inform trading, purchase/sale strategies and capacity investment decisions. Understand the divergent trends in gasoline and petrochemical and diluent demand in different countries and regions.

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