The global market for gasoline additive MTBE has set its eyes on the startup of LyondellBasell's propylene oxide (PO)/tertiary butyl alcohol (TBA) plant in Channelview, Texas.
The plant is expected to start operations in the first quarter of 2023 with capacity of about 1bn lbs (470,000 metric tons) of PO and 2.2bn lbs (1mn t) of TBA annually. TBA produced by the plant will be converted to two ether-based oxygenated fuels, methyl tertiary butyl ether (MTBE) and ethyl tertiary butyl ether (ETBE) — both high-octane components that help gasoline burn cleaner and reduce emissions.
MTBE was phased out in the US in the early 2000s in favor of corn-based ethanol, leaving the remaining producers of the octane enhancer to find destinations outside of the US. LyondellBasell, Indorama, Enterprise Products and TPC Group are the four major producers left in the US.
Added MTBE supply will be the plant's immediate impact on the market, as the plant nearly doubles LyondellBasell's current octane-enhancing output.
Mexico is the top destination for US-produced MTBE, with the US' southern neighbor taking in nearly 80pc of the country's total output. MTBE is mandated in Mexico's three largest cities, Mexico City, Guadalajara and Monterrey, but there is growth potential for MTBE in Mexican markets outside the cities if other high octane blendstocks — such as alkylate, reformate and ethanol — are priced higher than MTBE. More US gasoline exporters will also need to have access to MTBE to move supplies to Mexico, according to Argus Consulting,a division of Argus Media whose forecasts and analyses are separate and independent of Argus' news and price assessment business.
Blending infrastructure in Mexico is mostly dominated by state-run Pemex, which takes both neat and blended MTBE. Regular gasoline in Mexico contains upwards of 12pc MTBE and premium gasoline contains up to 8pc MTBE.
Outside of Mexico, another possible avenue for MTBE demand growth could come if US sanctions are lifted in Venezuela, allowing for more MTBE cargoes. But despite recent loosening of some US sanctions, the Venezuelan government and its opposition are are still far apart on settling issues required for more US sanctions relief.
Other alternative outlets could be Europe or Asia. On paper, the ideal outlet will be Europe as the shipping arbitrage typically opens as the year progresses, but there is a limit on how much they can import as the Middle East will also target the region.
The other alternative outlets will be China and Singapore. China will not be a likely scenario until Covid-19 lockdowns are eased. China has been exporting more MTBE during the second half of 2022. Singapore is where excess global MTBE is exported to and historically priced below the US and Europe.
The Singapore outlet will come with much lower netbacks and at times could be lower than the cost to produce MTBE in the US.
If US-produced MTBE margins are reduced, US MTBE producers, depending on their feedstock pricing and coproducts, could reduce rates, according to Argus Consulting.
However, if there are MTBE volumes contracted to Asian or European buyers, or if producers have market share in those regions, MTBE barrels could move quietly from the US without a big impact to US spot MTBE prices.
