According to an Argus Media webinar, Lauren Masterson, editor for Energy Argus Petroleum Coke, projects that the sharp downturn in the pricing of high-sulfur coke seen since the beginning of the summer will continue for the remainder of 2014, coinciding with the startup of two large coker projects in different parts of the world. These are the BP Whiting, Indiana 102,000 bpd refinery coker and the Total-Saudi Aramco JV Jubail refinery coker in Saudi Arabia. Another factor mentioned by Masterson affecting low global coke prices are stubbornly low coal prices.
As part of the the BP Whiting refinery’s plan to switch to processing about 270,000 bpd of discounted heavy crude (out of a total refining capacity of about 419,000 bpd), the facility’s new coker, which started up in November 2013, is eventually expected to produce over 2.0 million tons per year of high-sulfur coke with relatively low Hargrove Gindability Index (HGI), which is a shift away from the mid-sulfur coke that the refinery has historically produced. By definition, an HGI below 35 usually means a very hard coke requiring considerable grinding before it can be properly sized to meet burner nozzle specifications for the pulverized feed to the furnace where the coke will be burned. An HGI above 65 is usually recognized as a soft coke that will grind very easily (www.petcokeconsulting.com/glossary).
An interesting point made by Masterson about depressed coker product prices is that China, the largest buyer of US coke, has reduced coke purchases as their domestic housing market decelerates, thereby affecting coke-consuming industries like glass and cement. According to Masterson, this situation doesn’t look likely to change anytime soon, even though China’s GDP actually grew by about 7.5% in the second quarter of 2014. She also mentioned that March was the highest coke export total from the US to China on record. In May 2013, China represented 42% of US green coke exports, by far the largest buyer of US coke, but by May 2014, China dropped down to the 6th largest buyer of US coke with only 8% of the market, or about 150,000 tons in May.
It is generally assumed that the Saudi’s will build at least two new world scale refineries by the end of 2016, further increasing coker product availability, and Exxon Mobil is moving forward with a $1.0 billion coker at its refinery in Antwerp, Belgium — in spite of the gloomy outlook for the European refinery sector. Since 2008, some 15 European refineries have closed, representing 8% of the continents capacity, while others are running at reduced rates. Bloomberg noted that European refining margins shrank to $6.60/ton of crude processed in the first quarter of 2014, compared to $26.90/ton in the first quarter of 2013. It therefore stands to reason that coker product prices could remain depressed, at least in Europe, for a considerable period, or maybe not?
Diesel demand in Europe is increasing because of the transition to diesel from gasoline. Bloomberg recently reported that in 2013 Europe imported 13% of its diesel, jet fuel and gasoil. ExxonMobil’s new coker at the 320,000 bpd Antwerp refinery, operating since 1953, will no doubt help rebalance the European diesel deficit by converting low-value bitumen and high-sulfur marine fuel into diesel, marine gasoil and other products. This will help ExxonMobil stay ahead of the European Union’s policy of favoring cleaner fuels. In early July, ExxonMobil said there would be additional announcements concerning European refining investments designed to further strengthen strategic refineries in the 28-country continent. Earlier in May, Total SA approved a Euro 1.0 billion modernization project for its 338,000 bpd Antwerp refinery to convert heavy fuel into diesel and ultra-low sulfur heat oil, to be completed between the 2016 and 2017 time period.