January 16, 2019

A Glance at the US Downstream Forecast

  • Tight oil production in the US will have a significant impact on refining activity and competitiveness.
  • US tight oil production reached 4.9 million b/d in 2015. Tight oil production surpassed 50% of total US oil production that year. Production declined slightly in 2016-2017 then ramped up again. Current tight oil production is 7 million b/d. Tight oil production in North America is projected to approach 10 million b/d by 2040.
  • North American net crude oil import was about 5 million b/d in 2016. Net import resumed declining from 2017 and we project that the net import of crude oil will keep declining. The region will become independent or almost independent of crude oil by 2035. 
  • The historic trend in the declining quality of US crude oils processed will be slowed down due to expanding tight oil production.
  • US refiners will prefer heavy and sour crude to process as refineries have high secondary process capacities and for better margins. However, the high level of tight oil production will slow down the decreasing trend of gravity. Between 2017 and 2020, the gravity of processed crude oil will decrease by 0.3 °API, and gravity will pretty much be constant through 2035. Sulfur content will increase by 0.1% through 2020 and will then decrease 0.05 wt% by 2035. 
  • The lighter crude oil mix will require near-term refinery adjustments to handle the volume of light material in the crude oil mix and will create imbalances in the naphtha market.
  • Another emerging critical factor in the US supply is the growth in condensate and NGL volumes. Together, condensate-plus-NGL production will increase from 4.43 million b/d in 2016 to 9.53 million b/d by 2035.
  • The US refined product market will see a reduction in demand over the longer term due to an increase in fuel-efficient vehicles and electric vehicles. A surplus of refining capacity will emerge, creating incentives for industry to move into export markets.
  • We project demand of total refined products peaked in the US last year. Refined product demand will decrease from this year as the impact of motor gasoline fuel-economy improvements become a dominant factor. Demand will decline at an average rate of 0.5% annually between 2019 and 2040. 
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