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Latin America

World Refining and Fuels Service 2009-2030 (2011Edition)

Latin America 1

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Section 5

LATIN AMERICA

Primary Areas Covered

Key Findings and Conclusions

Assumptions and Inputs

The Region

Crude Oil and NGL Supply and Quality

Petroleum Product Supply and Demand

Transportation Fuel Quality

Refinery Capacity and Configuration

Refinery Throughput, Blending and Production

Refinery Challenges and Opportunities

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Section 5: Latin America Table of Contents

Section 5: Latin America.....................................................................................................5

A. Key Findings & Conclusions ...................................................................................................5

B. Assumptions & Inputs...........................................................................................................7

C. The Region ...........................................................................................................................8

D. Crude Oil and NGL Supply and Quality...................................................................................9

E. Petroleum Product Supply and Demand ..............................................................................11

1. Aggregate Latin America..................................................................................................11

2. Demand by Product.........................................................................................................13

3. Geographic Supply and Demand Breakdown....................................................................16

F. Transportation Fuel Quality ................................................................................................17

1. Gasoline..........................................................................................................................17

2. Diesel..............................................................................................................................20

3. Other ..............................................................................................................................23

G. Refinery Capacity and Configuration ...................................................................................25

1. Current Capacity and Expansion Projects in Latin America ................................................25

2. Competitive Positioning ..................................................................................................27

H. Refinery Throughput, Blending and Production ...................................................................28

1. Projections: Aggregate Latin America...............................................................................28

2. Refined Product Supply and Demand...............................................................................30

3. Refinery Capacity Requirements ......................................................................................32

I. Latin American Refinery Challenges and Opportunities........................................................37

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Section 5: Latin America Table Index

Table 5.1: Countries in Latin America..................................................................................................8

Table 5.2: Latin American Crude and NGL Supply (2008-2030) ...........................................................10

Table 5.3: Quality of Crude Oil Processed in Latin America (2009 & 2030) ..........................................10

Table 5.4: Latin American Refined Product Demand (2008-2030).......................................................12

Table 5.5: Latin American Current Select Gasoline Specifications (2010) ............................................18

Table 5.6: Latin American Announced Revisions to Gasoline Specifications........................................18

Table 5.7: Latin American Regional Trends for Gasoline Quality ........................................................19

Table 5.7a: Latin American Regional Gasoline Demand by Sulfur Category.........................................19

Table 5.8: Latin American Current Transport Diesel Fuel Specifications (2010) ...................................21

Table 5.9: Latin American Announced Revisions to Diesel Fuel Specifications ....................................22

Table 5.10: Latin American Regional Trends for Transport Diesel Specifications .................................23

Table 5.10a: Latin American Distillate Demand by Sulfur Category ....................................................24

Table 5.11: Latin American Refining Capacity and Anticipated Expansions .........................................25

Table 5.12: Reported Expansion Projects in Latin America (2010-2015)..............................................26

Table 5.13: Latin American Refinery Complexity Ranking ..................................................................27

Table 5.14: Latin American Refinery and Blender Input and Production (2008-2030)..........................28

Table 5.15: Ethanol and Biodiesel Supplies for Latin American Market (2008-2030) ...........................29

Table 5.16: Refined Product Balance in Latin America (2009-2030) ....................................................31

Table 5.17: Latin American Incremental Capacity Requirements (2009-2030).....................................32

Table 5.18: Latin American Projected Capacity Requirements (2010-2030) ........................................33

Table 5.19: Incremental H2 Production and Sulfur Recovery Requirements (2009-2030) .....................36

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Section 5: Latin America Figure Index

Figure 5.1: Map of Latin America ........................................................................................................8

Figure 5.2: Latin American Crude and NGL Supply (2009).....................................................................9

Figure 5.3: Quality of Crude Oil Processed in Latin America (2009-2030) ............................................10

Figure 5.4: Latin American Product Demand Composition (2009).......................................................11

Figure 5.5: Latin American Refined Product Growth (2005-2030) .......................................................12

Figure 5.6: Latin American Product Mix and Incremental Product Requirements (2009-2030) ............13

Figure 5.7: Latin American Gasoline and Naphtha Growth (2005-2030)..............................................13

Figure 5.8: Latin American Total Distillate and On-Road Diesel Portion Growth (2005-2030) ..............14

Figure 5.9: Latin American Jet Fuel and Kerosene Growth (2005-2030) ..............................................15

Figure 5.10: Latin American Residual and Bunker Growth (2005-2030) ..............................................15

Figure 5.11: Latin American Top Ten Refinery Complexity Ranking ....................................................27

Figure 5.12: Ethanol and Biodiesel Supplies for Latin American Market (2009-2030) ..........................29

Figure 5.13: Latin American Gasoline-to-Distillate Production Ratio (1995-2030) ...............................30

Figure 5.14: Latin American Crude Distillation Capacity (1995-2030)..................................................34

Figure 5.15: Latin American Downstream Refining Capacity (1995-2030) ...........................................35

Figure 5.16: Incremental Hydrogen Production Requirements in Latin America (2009-2030) ..............36

Figure 5.17: Incremental Sulfur Recovery Requirements in Latin America (2009-2030) .......................36

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Section 5: Latin America

Latin American crude and NGL production will increase by 2.9 million barrels per day between 2009 and2030. Crude exports are projected to increase to (OR) million barrels per day by 2020 and then graduallydecline to (OR) barrels per day in 2030 as Latin American domestic consumption increases.

Despite a reduction in regional GDP growth by 1.7% in 2009, Latin American gasoline demand grew by2.7% and distillate demand rose by 1.7%. One of the reasons behind higher gasoline volume is Brazilianliquid fuel demand’s continued reliance on ethanol (E100). Regional demand is projected to recover in2010 and experience strong growth, as Latin America becomes the third-fastest growing region in theworld behind the Middle East and Asia-Pacific.

Significant change in refining and refined product markets will occur during the 2010-2030 period. Crudecapacity will require expansion, and aggressive conversion capacity expansion will be required too.Progressively more stringent product specifications will require large gasoline and distillate desulfurizationcapacity expansions. Some countries, such as Brazil and Colombia, are upgrading and/or building newrefineries to make the transition. Other countries, such as Venezuela and Argentina, have done little to getready for a transition to cleaner fuels.

A. Key Findings & Conclusions Latin American crude oil production has lower quality than any other region. The average gravity of

crude oil processed in the region was 26.2 °API and 1.28 wt% sulfur in 2009. The quality is expectedto decline to (OR) °API and (OR) wt% sulfur by 2030.

Overall petroleum product demand is projected to grow by 2.0% in 2010, (OR)% annually through2020, and then slowdown to (OR) in 2020-2030. Regional gasoline demand was affected byBrazilian drivers who filled their tanks up with gasoline (E25) during the inter-harvest period due tohigher ethanol prices at the pump. Gasoline (E25) has higher energy content than E100 and thusrequires less volume. Gasoline demand is expected to grow by an average of 2.9% annually through2015 and then drop to an average of (OR)% between 2015 and 2030. Distillate demand growth willcontinue to be strong at an average of 2.4% annually through 2015, and continue at the same paceof (OR)% through 2030, driven by on-road diesel with average annual growth rate of (OR)% from2010 through 2030.

Gasoline exports to North America have recently declined as high-quality, more restrictive NorthAmerican gasoline specifications have been implemented. The European gasoline surplus has grownand Latin American demand grew. The region is a net importer of gasoline, largely driven by Mexico’simport requirements. Gasoline supply and demand is projected to come into balance by 2020.

Biofuels will play a major role in the region, increasing from 0.42 million barrels per day in 2009 to(OR) million barrels per day in 2030. Biofuels will account for nearly (OR)% of gasoline plus diesel in2030. Brazilian ethanol exceeds 50% of the gasoline pool in 2009.

The primary quality driver will be lowering of gasoline and diesel sulfur specifications. The two largestconsumers in the region, Brazil and Mexico, plan to implement ultra-low sulfur gasoline and dieselprograms by 2015. In aggregate, the region’s gasoline sulfur level will be reduced from (OR) in 2010to (OR) in 2030. On-road and off-road diesel sulfur will be significantly reduced, from 1,550 ppm and3,900 ppm in 2009 to (OR) ppm and (OR) ppm in 2030, respectively.

Aggressive expansion in conversion capacity will be required to keep pace with demand and processthe lower-quality indigenous crude. About (OR) million barrels per day in total conversion capacityexpansion (catalytic cracking, hydrocracking plus coking) will be required by 2030 (a (OR)%increase).

By 2020, incremental gasoline and diesel desulfurization capacity requirements will be 0.33 millionbarrels per day and 1.25 million barrels per day, respectively. In addition, distillate desulfurizationcapacity will be revamped for ultra-low sulfur product production. Between 2020 and 2030, thesecapacities will need to increase further: additional (OR) million barrels per day gasolinedesulfurization and (OR) million barrels per day diesel desulfurization.

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The analysis projects a large incremental requirement for hydrocracking capacity ((OR) millionbarrels per day) between 2009 and 2030 to keep pace with growing demand and qualityrequirements. New refineries under consideration are looking at configurations for hydrocrackingprocesses.

Requirements to produce lower-sulfur marine bunker will entail additional investment in LatinAmerican refining. The timing and relative shift of product from residual to distillate are uncertain.Hart Energy Consulting has forecasted a requirement of 0.34 million barrels per day of residual fueldesulfurization to meet the future 0.5 wt% sulfur residual bunker requirement, assuming a shift of 7%of the residual bunker market to marine diesel.

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B. Assumptions & Inputs Historical Supply and Demand: based on data from the U.S. Energy Information Administration (EIA),

International Energy Agency (IEA), Agência National do Petroleó (Brazil) and Statistical YearbookPEMEX 2008 (Mexico). Data supplemented and adjusted based on Hart Energy Consulting internalproprietary data and analyses.

Supply and Demand Projection: developed by Hart Energy Consulting based on the InternationalEnergy Agency (IEA) data and the information from the U.S. Energy Information Administration (EIA)as well as internal proprietary data and previous analyses.

Crude Oil Supply and Quality: analysis based on the U.S. Energy Information Administration (EIA)and International Petroleum Encyclopedia (IPE) information. Data supplemented and adjusted basedon Hart Energy Consulting internal proprietary data and analyses.

Fuel Quality, Specifications and Regulations: provided by the International Fuel Quality Center(IFQC).

Throughout this study, on-road diesel corresponds to the International Energy Agency (IEA) roaddiesel data, while off-road includes IEA’s agriculture, rail transport and distillate marine fuel, includinginland shipping.

Biofuels, renewable fuels and alternative fuels analysis provided by the Global Biofuels Center(GBC).

Refining Capacities: analysis based on Oil & Gas Journal (OGJ) and Hydrocarbon Processing (HP).Data supplemented and adjusted based on Hart Energy Consulting internal proprietary data andanalyses.

Refining and Market Outlook and Projections: developed by Hart Energy Consulting based onregional aggregate Refining Linear Programming (LP) model using the AspenTech PIMS system.

Mexico assumed to proceed with harmonization of gasoline and diesel sulfur specifications with theUnited States.

Competitive refining ranking is based on Nelson Complexity Index as listed in Oil & Gas Journal andadjusted based on Hart Energy Consulting internal proprietary data and analyses.

Oil & Gas Journal - Worldwide Construction Update Report (April 5, 2010).

Hart’s World Refining and Fuels Today

Hart’s Refinery Tracker

International Fuel Quality Center

Global Biofuels Center

Outlook & Impact for Renewables in North American Refining and Gasoline Markets, Hart EnergyConsulting (2008)

In the tables of this section, the sums may not correspond to totals due to rounding.

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C. The RegionThe Latin American region includes Mexico, Central America, non-U.S. Caribbean and South America.Puerto Rico and the U.S. Virgin Islands are included in the North American section. The Latin Americancountries are listed in table 5.1 and shown on the map in figure 5.1.

Table 5.1: Countries in Latin America

Argentina Dominican Republic Lesser AntillesBahamas Ecuador MexicoBelize El Salvador NicaraguaBolivia French Guiana (France) PanamaBrazil Guatemala ParaguayChile Guyana PeruColombia Haiti SurinameCosta Rica Honduras UruguayCuba Jamaica Venezuela

Source: Compiled by Hart Energy Consulting

Figure 5.1: Map of Latin America

Source: Created by Hart Energy Consulting

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D. Crude Oil and NGL Supply and QualityLatin American crude oil and natural gas liquids production was at 9.79 million barrels per day in 2009.Crude oil and Natural Gas Liquids (NGL) production is projected to reach (OR) million barrels per day by2020. Production will slowly decline to (OR) million barrels per day through 2025 and (OR) million barrels aday in 2030.

Brazil, Mexico and Venezuela make up 59% of the crude oil and NGL production in the region. Brazil andVenezuela will account for essentially all of the forecasted increase in production.

Brazilian liquids production has grown steadily during the past decade and Hart Energy Consulting expectsit will continue on that track through 2030. Production reached 2.0 million barrels per day in 2009, a 7%increase above 2008. Although challenges are associated with deep-water production, projects scheduledto come on stream by 2014 will add almost (OR) million barrels per day of production. Brazil’s production isexpected to expand to (OR) barrels per day by 2030.

Mexico’s primary producing field, Cantarell, has entered into a long-term decline. Efforts to compensate forthis decline are not progressing at a pace that will reverse Mexico’s overall crude oil production declinethrough the forecast period. Hart Energy Consulting expects total crude oil and condensate production toreach 2.6 million barrels per day by 2010, dropping to 2.2 million barrels per day by 2020 and then to below(OR) per day by 2030. This will occur despite successful (although slow) development of deep-water fields.

Venezuela contains the largest oil reserve in the Western hemisphere, much of which includes very heavyoil. Venezuela has reported investment plans to increase production to 5.0 million barrels per day.However, the required level of investment is not likely to be reached. Production is projected to increase to(OR) million barrels per day by 2020 and then begin to decline. An increasing portion of the production willbe heavy crude. Currently, more than 50% of production is heavy oil (below 22 °API and including oilupgraded to synthetic crude). By 2030, (OR)% of production will be heavy oil.

Crude oil production in Latin America exceeds demand and the surplus is exported. The region alsoimports crude because of quality constraints and logistics. In 2009, Latin American crude accounted for83% of the region’s net supply, and crude imports and NGL accounted for 5% and 12%, respectively(Figure 5.2).

Figure 5.2: Latin American Crude and NGL Supply (2009)

Source: Hart Energy Consulting analysis based on IEA data (2010)

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Latin American crude exports will increase through 2020. Beyond 2020, growth in demand will exceedproduction gains and exports will decline (Table 5.2). Year 2008, unchanged from last year’s study, ispresented in table 5.2 to show a significant change caused by the global recession in 2008-2009.

Table 5.2: Latin American Crude and NGL Supply (2008-2030)

Latin America 2008 2009 2010 2015 2020 2025 2030Crude Production 9.28 8.92 9.40 (OR) (OR) (OR) (OR)Crude Imports 0.36 0.36 0.36 (OR) (OR) (OR) (OR)Crude Exports 3.38 3.04 3.43 (OR) (OR) (OR) (OR)

Subtotal Crude Supply(1) 6.26 6.24 6.33 (OR) (OR) (OR) (OR)NGL Production 0.87 0.87 0.97 (OR) (OR) (OR) (OR)

Total Crude/NGL Supply 7.13 7.11 7.30 (OR) (OR) (OR) (OR)Note:(1)Includes crude oil burned directly

Source: Hart Energy Consulting analysis and projections based on IEA data (2010)

Table 5.3 shows the quality of crude processed in Latin American refineries, and figure 5.3 shows the trend inquality from 2009 through 2030. Indigenous crude production accounts for 94% of crude oil processed in theregion. The quality of crude processed in Latin America differs from production quality presented in the GlobalOverview because a large portion of heavier high-sulfur crude is exported. However, the quality of crudeprocessed still reflects the heavy, high-sulfur characteristics of indigenous production.

Table 5.3: Quality of Crude Oil Processed in Latin America (2009 & 2030)

Latin America2009 2030

PercentSupply °API Sulfur

[wt%]PercentSupply °API Sulfur

[wt%]LA Production 94 25.6 1.29 (OR) (OR) (OR)Imports 6 35.0 1.10 (OR) (OR) (OR)

Total 100 26.2 1.28 (OR) (OR) (OR)Note: Refer to Global Overview for additional regional crude quality data.

Source: Hart Energy Consulting analysis and projections (2010)

Figure 5.3: Quality of Crude Oil Processed in Latin America (2009-2030)(▬) °API, (▬) Sulfur [wt%]


24.0

24.5

25.0

25.5

26.0

26.5

27.0

2009 2010

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1.30

1.40

1.50

2010 2015 2020 2025 2030

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E. Petroleum Product Supply and Demand

1. Aggregate Latin America

Latin America represents nearly 10% of global petroleum product demand. Refined products consist of63% of light products (gasoline, naphtha, jet fuel, diesel and other middle distillate) as indicated in figure5.4. Gasoline and distillate make up 55% of refined product demand.

Much of the region is oriented toward gasoline in the transportation sector. In the three largest consumingcountries (Brazil, Mexico and Venezuela), gasoline makes up more than 32% of their aggregate totalrefined product demand. The gasoline demand in Brazil includes both neat ethanol and ethanol blendedwith gasoline. In 2009, the total ethanol (neat plus blended) in Brazil represented more than 50% ofgasoline consumption.

In other countries, such as Argentina and Colombia, alternative fuels, such as liquefied petroleum gas(LPG) and compressed natural gas (CNG), supply a significant portion of transportation requirements;gasoline accounts for only 18% of total product demand and distillate for more than 37% in these twocountries.

Residual fuel represents 14% of refined product demand and has been recently declining because ofnatural gas replacement.

Figure 5.4: Latin American Product Demand Composition (2009)

Source: Compiled by Hart Energy Consulting from IEA data (2010)

The region as a whole has refining capacity in excess of total product demand. However, due to lowutilization and limited downstream processing capability, the region is a net importer of product, primarilydistillate fuel. Mexico and several Central American countries have had a growing shortfall of gasoline anddistillate.

Prior to the recent global economic recession, growth in overall refined product demand in Latin Americahas been relatively high (Figure 5.5). Growth has averaged nearly 4.0% annually driven by gasoline anddistillate that have together increased by 5.5% annually from 2005 to 2008 as the flex-fuel vehicle fleetrollout in Brazil gained traction.

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In 2009, growth in demand for refined petroleum products declined due to the slowdown in Latin Americaneconomies, but still remained positive at 1.6%. The regional economies are expected to rebound andrefined product demand is projected to grow by 2.0% in 2010.

Figure 5.5: Latin American Refined Product Growth (2005-2030)(■) Volume [million bpd], (▬) Annual Growth [%]

Source: Hart Energy Consulting analysis and forecast based on IEA data (2010)

Latin American petroleum product consumption is projected to grow at an annual average rate of 2.0% in2010 and (OR)% through 2030 to a total of (OR) barrels per day. Light product demand (gasoline, distillate,jet fuel and kerosene) will grow at a rate of nearly (OR)% per year.

Table 5.4: Latin American Refined Product Demand (2008-2030)(million barrels per day)

Product 2008 2009 2010 2015 2020 2025 2030Gasoline 2.20 2.26 2.31 (OR) (OR) (OR) (OR)Naphtha 0.27 0.29 0.29 (OR) (OR) (OR) (OR)Jet Fuel 0.29 0.29 0.30 (OR) (OR) (OR) (OR)Kerosene 0.03 0.03 0.03 (OR) (OR) (OR) (OR)Middle Distillate 2.26 2.30 2.35 (OR) (OR) (OR) (OR)

Road Diesel 1.43 1.47 1.51 (OR) (OR) (OR) (OR)Off-Road Diesel(1) 0.41 0.42 0.44 (OR) (OR) (OR) (OR)Other Gas Oil 0.42 0.41 0.40 (OR) (OR) (OR) (OR)

Residual Fuel 1.16 1.16 1.17 (OR) (OR) (OR) (OR)Bunker 0.36 0.36 0.37 (OR) (OR) (OR) (OR)

LPG 0.98 0.99 0.99 (OR) (OR) (OR) (OR)Other Products(2) 0.92 0.92 0.95 (OR) (OR) (OR) (OR)

Total 8.10 8.24 8.40 (OR) (OR) (OR) (OR)Notes:(1)Contains diesel used in agriculture, on rail and distillate marine fuel.(2)Lubricants, asphalt, refinery fuel gas, coke and miscellaneous product.


0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2005 2006 2007

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2007 2008 2009 2010 2015 2020 2025 2030

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Documents

Section 5 LATIN AMERICA - Hart Energypdfs.hartenergy.com/HartEnergySite/wrfs.pdf · 2010 and experience strong growth, as Latin America becomes the third-fastest growing region in