FGE’s detailed assessment of the mid/long-term outlook for condensates provides comprehensive coverage on the key challenges facing the market today. In this study, we forecast condensate supply and demand globally using bottom-up modelling to explore impacts and trends for condensate trade and pricing up to 2030.
The year 2018 was a tumultuous time for the global condensate market. Not just in terms of the US Treasury and State Department putting Iranian condensate supply firmly in their crosshairs, but particularly with the ongoing structural shift in supply, which is forcing condensate buyers, particularly those in East Asia, into a structural rethink of their feedstock procurement strategies.
Could the end of the gas moratorium in Qatar provide a respite for sour grades? Qatar Petroleum has since committed to four new liquefaction mega-trains as part of the North Field expansion (NFE) project. However, will this be enough to offset the loss in Iran volumes, and will it come in time to do so?
The US is clearly in focus now as the incremental supplier. We have already seen an increase in US extra-light crude/ condensate volumes making the long journey eastwards. In 2017 we saw just 2.5 mmb heading eastwards; in 2018 we saw another 12 mmb of arbitrage and test cargoes moving east. Already in 1H 2019 we have seen some 20 mmb of US-origin condensate and extra-light crude headed into Asia. On top of this, we are finally seeing the widely anticipated emergence of a new West Texas Light grade from the Permian Basin, offering a window into future US supply.
However quality and consistency issues remain for US grades with splitters struggling to deal with the residual component of EF grades as well as other contaminants.
And what about naphtha? Previously flexible splitters turned to heavy full range naphtha. A collapse in naphtha prices in 4Q 2019 has made this an attractive proposition. Is this something structural or just a blip on the radar?
Asian buyers find themselves in a quandary, and the IMO’s potential impact on crude/condensate doesn’t help matters. Do they continue to look to future supplies from the Middle East or do they look for alternative sources? Importantly, does this mean facing additional capital costs to make their splitters “future-proof” for the 2020s and ready for the future condensate supply landscape?
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