Asian refiners cast cautious eyes on cheaper high-acid crudes

Singapore: Asian refiners are turning to high-acid crudes, whose output is set to rise more than 40 per cent in four years, as they seek cheaper options for their new complex facilities in the face of persistently high global prices.

Oil demand in Asia will rise almost a third in the next decade and the region leads the way in new and upgraded capacities that are more proficient in processing the corrosive crude produced in such diverse places as Brazil, Sudan and China.

But the nascent demand may not be enough to boost prices of the thus-far unpopular crude, as its output grows faster than other grades and as Western consumption holds steady due to a lack of major new refining capacities.

"Acidic crude is usually rich in low-sulphur gas oil and fuel oil and Asia needs it. And there are new refineries coming up there," said Al Troner, managing director of Asia Pacific Energy Consulting (APEC), which recently published the study, West comes East: The Emerging Global Acidic Crude Market.

He estimated that acidic crude output will rise to 5.768 million barrels per day (bpd) in 2010, from 4.027 million bpd in 2006.

This is a sharp 43 per cent increase, outstripping the 16 per cent growth in total world oil production forecast by the International Energy Agency (IEA) for the same period in its World Energy Outlook 2007.

Acidic crudes have a high Total Acid Number (TAN) and large levels of naphthenic acids that can corrode refinery equipment, leaving them out of reach of basic Asian plants until lately.

However, at least 800,000 bpd of the total 4 million bpd of upgraded and new refining capacity expected onstream over the next three years in Asia will be able to run acidic crude.

Pegged at deep discounts, these crudes are a good buy for sophisticated plants built with multi-billion dollar investments.

"Asian refiners see acidic crudes as a good bargain and Asia has to bring in a lot more crude, so they will pull in acidic crudes," says Kevin McConnachie, principal consultant for Hawaii-based FACTs.

Oil demand in Asia will rise almost a third in the next decade and the region leads the way in new and upgraded capacities proficient in processing corrosive crude.