Asia-Pacific condensate market transformation prompts new Argus index

US shale boom and export policy leads to new Asia-Pacific condensate market dynamics

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Aug 15, 2014, 12:45 ET

SINGAPORE, Aug. 15, 2014 /PRNewswire/ -- New flows of lightly distilled US condensate exports to the expanding Asia-Pacific market for petrochemical feedstocks highlight the need for more transparent price identification for condensates in the region.

The Argus Condensate Index (ACI), launched by energy price reporting agency Argus this month, is a key indicator of value for participants in the emerging market to supply petrochemical feedstocks from the US and other producers to Asia-Pacific.

The first tankers carrying US lightly distilled condensate have been booked to take cargoes from the Gulf coast to Japan and South Korea, following US commerce department authorisation of exports by US firms Pioneer and Enterprise from the Eagle Ford shale formation in Texas. The move clarifies the terms of a 40-year old ban on virtually all US crude and condensate exports. At the same time, new splitters in South Korea, Singapore and China are boosting Asia-Pacific demand for condensates this year.

The ACI will bring transparency to a market affected by diverse price signals, including the relative value of crude and naphtha. The daily ACI reflects the lowest delivered price in southeast Asia of the two most traded condensate grades in the region — Qatari Deodorized Field Condensate (DFC) and Australian North West Shelf (NWS). Qatar exports 22 cargoes of DFC a month, mostly to Asia-Pacific, and Australia markets five cargoes of NWS condensate each month.

Argus Media chairman and chief executive Adrian Binks said: "Argus works with the industry to develop the price assessments needed for transparency. The ACI will help market participants understand value and realise opportunity."

The ACI is published in the daily Argus Crude market report and through Argus Direct, an advanced online platform.

Notes to editors

Condensate is formed when pressurised field petroleum condenses from gas into light liquids on coming to the surface, where the temperature and pressure are lower. Distilling it helps stabilise the condensate, and the commerce department has now made clear that this process makes it eligible for US export. Condensate can be refined in the same way as crude, but splitters are often a more appropriate way of obtaining higher-value products and petrochemicals from the feedstock.

US condensate output has doubled to 1mn b/d in five years. But splitters to process the rising production have yet to be built in the US, while condensate splitter capacity in Asia-Pacific will reach 1.1mn b/d by the end of this year from about 665,000 b/d a year earlier. Asia-Pacific's newly added processing capacity can handle a range of condensate with varying sulphur content from Asia, west Africa, the Mediterranean and now the US. And regional refineries process condensates in crude distillation units (CDUs) when they calculate that margins from processing the feedstock are better than for light crude.

The bulk of the increase in Asia-Pacific condensate splitter capacity is related to the start-up of four projects — Jurong Aromatics (100,000 b/d) in Singapore, SK Energy (120,000-140,000 b/d) and Samsung Total (140,000 b/d) in South Korea, and China's Tenglong unit, which originally came on stream in 2013 but has been boosting runs this year.

Distillation uses heat to separate a liquid into distinct components, and is associated with almost every downstream process, especially CDUs in refineries.

Light distillation is used in a stabiliser, where a small, simple fractionator removes the most volatile elements in crude and condensate output in the field.

A condensate splitter is a simple fractionator that can separate liquids into fewer components than a modern refinery's CDU, but more components than a stabiliser used in light distillation. Splitters separate the lightest components in condensates — including ethane, propane and the C5+ group, which comprises naphtha and natural gasoline.

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