* About 550,000 bpd splitter capacity to start up in next 4
* Qatar exports to fall on local demand
* More supply could come from Russia, North America
By Florence Tan and Seng Li Peng
SINGAPORE, Aug 24 Asia's condensate demand is
expected to double by 2016 as refiners and petrochemical makers
build splitters to process an abundent supply of the super light
crude into raw materials for making plastics and for producing
better quality gasoline to feed demand.
South Korea, China and Singapore are building distillation
units that cost less than one seventh of a typical refinery to
process large volumes of condensate produced along with
liquefied natural gas (LNG).
Yet, by the time these facilities come online, condensate
sales from top suppliers such as Qatar, also the world's biggest
LNG exporter, are slated to fall as the nation feeds local
demand that is expected to rise with more splitters coming up
there. That will open the Asian market to condensate supplies
from Russia and North America, traders and analysts said.
"Within the East of Suez region, we've kind of hit a hiatus"
in new supply, said Al Troner, president of Houston-based Asia
Pacific Energy Consulting. "But I think that's going to give the
window of opportunity for extra-regional sellers to start coming
Condensate splitters of close to 550,000 barrels per day
(bpd) in capacity would start operating between 2012 and 2016,
industry data showed.
Condensate splitters mainly produce naphtha. Asia is short
of the product, especially the heavy grade needed for making
aromatics, which is used for making plastics, synthetic rubber
and polyester. It is also used as an octane booster in gasoline.
"Asia needs a lot of naphtha because of the petrochemical
production, especially in China where it produces end products
for many countries," said Victor Shum, managing director for
downstream energy consulting at IHS Purvin & Gertz.
China's consumption of plastic may grow by up to 7 percent
this year after stalling in 2011, analysts said. While a
slowdown in Europe is weighing on the country's industrial
output, there is little doubt of a revival in demand in coming
Large petrochemical makers such as Dragon Aromatics in China
typically have a condensate splitter at their plants to offer
some control over costs by reducing reliance on naphtha, said a
"They can at least have the option of buying condensates or
naphtha, depending on the prices," he said.
Splitters also make a smaller volume of middle distillates
-- the most profitable part of the barrel -- ensuring a fatter
return for these companies.
Yet, condensate exports from Qatar will slip below the
current 500,000 bpd once a 146,000-bpd splitter at Ras Laffan
starts operating in 2016, offsetting about 110,000 bpd of new
condensate output from the Barzan gas project, according to
Tasweeq and Poten & Partners.
In Asia, condensate output will increase slightly in
Australia and in Southeast Asia, but most of it will be consumed
domestically, analysts said.
Asian supply is expected stay flat at about 740,000-750,000
bpd, said Victor Shum, managing director for downstream energy
consulting at IHS Purvin & Gertz.
North America is expected to step up condensate exports
following a shale gas boom, while Russia is looking at sending
more condensate east as oil demand in Europe stagnates amid the
euro zone crisis.
A revamp at the Panama Canal will allow bigger tankers of
160,000 deadweight tonne to pass through, facilitating
condensate exports from the U.S. Gulf Coast, Troner said. "The
U.S. is going to start exports before 2015 and the Russians are
already mobilising additional volumes to go east by next year,"
he said. "The distance is slightly greater, they are both
long-haul cargoes, but this is formidable competition."
Towards the second half of the decade, Brazil and East
Africa could also be potential suppliers as they step up natural
gas production, he said.
Russian producer Novatek was already selling Porvosky
condensate to North Asian users, traders said.
Still, the Middle East will play a dominant role in Asia's
condensate market. Qatari exports will continue and Iran may be
become a regular supplier as condensate production is expected
to offset declining crude output in the country.
Iran's condensate output is expected to rise by 280,000
barrels per day (bpd) by 2020 as it will start up several phases
of gas production at its vast South Pars field despite project
delays, according to FACTS Global Energy.
But a series of tight Western sanctions aimed at forcing
Iran to abandon a disputed nuclear programme may mean further
delays for those projects as financing, securing technology and
equipment becomes difficult.
(Additional reporting by Elizabeth Law; Editing by Manash
Goswami and Chris Lewis)