Petchem growth will help drive crude demand into 2013: IEA

Worldwide demand for liquid petroleum gas and naphtha as petrochemical feedstocks will help force demand for crude oil 8.4% higher by 2013, a report from the International Energy Agency said July 1.

By 2013, oil demand projections now incorporate an extra 440,000 b/d for naphtha (affecting China, Singapore, India and Chinese Taipei) and 330,000 b/d of LPG/ethane (including Saudi Arabia, Iran and Qatar) due to upwardly-revised demand from the petrochemical sector, IEA said, noting that overall revisions to LPG and naphtha demand for these countries are different, as many other factors/drivers besides the petrochemical sector were also accounted for.

Prospective global petrochemical additions could total 40 million mt/year of new or expanded primary petrochemical production capacity by 2013.

These are overwhelmingly centered in Asia, most notably in China, but also significantly in the Middle East (Saudi Arabia, Iran and Qatar), IEA said.

Global oil product demand is expected to grow by 1.6% per year on average over the next five years, rising from 86.9 million barrel/day in 2008 to 94.1 million b/d in 2013.

The pattern of growth is diametrically opposed to the trends in supply, with the growth dragged down by slower GDP growth in 2008 and 2009,before returning to trend levels in 2010 and beyond, IEA said.

IEA said that the main drivers for demand growth would be middle distillates such as jet fuel, kerosene, diesel and other gasoil. These would be followed by LPG and naphtha, mostly used as petrochemical feedstocks, and gasoline.

Middle East growth

In the Middle East, oil product demand is projected to grow by 5.1% or 390,000 b/d per year on average between 2008 (6.9 million b/d) and 2013 (8.8 million b/d).

This is some 150,000 b/d higher than estimate in the last IEA mid-term report (to 2012), largely because of a reappraisal of the region's petrochemical potential and despite Iran's fall in gasoline demand.

By the end of the forecast period, the region will account for roughly 19% of total non-OECD demand and 26% of its average volumetric increase per year, IEA said.

With respect to global volumes, Middle-Eastern demand will represent 9.4% of global oil product demand and almost 27% of global growth over the period.

As in Asia, demand is driven by strong economic momentum and continued urbanization, industrialization and population growth, coupled with favorable end-user administered price regimes (among the lowest in the world and unlikely to be altered).

Demand for naphtha is poised to increase sharply to feed the region's expanding petrochemical sector.

Created: July 7, 2008

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