At $18-20/b oil and no premium, projects are only viable if gas cost is $.50-$.75/mmBTU or less.
As a consequence, projects may not be viable in Asia (where gas cost is generally higher) if there is not a substantial premium.
Some have talked of premiums of upwards of $10/bbl for diesel. We do not believe this for one moment!
Are all of these projects really viable? (cont’d)
Will there be a substantial premium? Consider the case of Japan...
Some believe that GTL could command a substantial premium in Japan, but they are probably mistaken.
Although officially diesel sulfur standards are to change in January 2005, Japanese refiners will start manufacturing 50 PPM diesel this winter and all inventories in the Tokyo metro area will be 50 PPM by April 2003.
It is expected that 10 PPM diesel will follow, probably well before 2010.
Asian prices for gasoline and diesel fuels are now sharply below those of the U.S., and cracking margins are much lower. Generally, there is an unsustainable and extreme difference between the regions.
Why is there such disparity? The answer is in the product specifications, which has resulted in a globalized jet fuel trade and regionalized gasoil and gasoline markets.
By 2010, product specifications in Asia, the U.S., and Europe will be very close to each other. The convergence of these product markets has important implications for the product trade.
For the first time, the key markets will have similar specifications, providing the basis for a globalized product markets. This means products will move from one region to another if economics permits.