The sulphur content of fuels is being restricted severely in most of the world’s key oil markets. Within the next few years many of the main markets will move to ‘sulphur-free’ diesel and this summer the US market will make the shift to 15ppm sulphur fuel. However, the capacity to produce ultra-low-sulphur diesel fuel is barely keeping up with demand, which is growing by 2% a year in the largest consuming countries. In spite of huge investments in hydrotreating capacity made by refiners worldwide, crackspreads on ultra-low-sulphur diesel are at record highs and differentials between low- and high-sulphur fuels are widening.
The global refining system also faces another problem: crude oil supplies are becoming heavier and sourer — that is, they yield fewer lighter products under straight distillation and contain more sulphur. ENI, the Italian oil company, in its World Oil and Gas Report 2005, estimates that between 1999 and 2004 the share of sweet (low sulphur) crudes in global production fell from 36.2% to 34.6% while the share of sour grades rose from 54.4% to 55.3%. Running a sweeter crude slate is one option for refiners who need to produce lower-sulphur distillates. However, once diesel sulphur limits fall to 500ppm or less, sweeter grades are not enough to meet specifications — desulphurisation must be added to the refining process.
The rush to reduce diesel fuel’s sulphur content is affecting the production of and trade in other products. Refiners are reducing jet fuel output in order to include lighter and less sulphurous cuts in the diesel pool. Output has fallen in China and the US this year, forcing both countries to boost imports to meet growing demand. Naphtha production, on the other hand, has risen as refiners maximise throughputs at catalytic reformers that produce the hydrogen needed to run desulphurisation units. As sulphur limits continue to fall, export refiners in the Middle East, Asia and Russia are starting to invest in hydrotreating capacity in order to ensure access to the largest diesel markets. Refiners in the Middle East plan to add 400,000 bpd of capacity by 2008 and a further 300,000 bpd will be built in China.
