Perspectives on the Latin American Refining Industry
Daniel Monzón Partner at Arthur D. Little shares his insights with us on the Latin American Refining Industry
The Latin America Refining Technology Conference (LARTC), hosted by YPF and with the support of the Ministry of Energy and Mining, will take place in Buenos Aires, from the 5-7 September. Daniel Monzón, a partner at Arthur D. Little and author of this paper will be chairing the event.
The Latin American refining industry, with its almost 70 refineries, faces a challenging and changing environment that forces them to review strategy to maintain profitability.
Short on refining and conversion capacity
Latin America as a whole will experience strong deficits both in diesel and gasoline by the year 2020 since it is expected a 860 kbd and 910 kbd net importing position for diesel and gasoline respectively. The main deficits in diesel take place in Brazil, Central America, Chile and Argentina, while Mexico and Central America lead deficits in gasoline, followed by Brazil.
The overall demand of diesel and gasoline is to hit 5.3 million barrels per day by 2020 in Latin America, growing at a 2.4% CAGR pace over 2016-2020 period, with the largest markets being Brazil and Mexico. Even though some production increases are forecasted in Mexico and Colombia, Latin America will continue to fall short on refining capacity.
Despite this shortage, there are several refineries in Latin America operating below optimal utilization rates. The reason behind this phenomenon relies on a mismatch between refinery configuration and domestic demand product mix.
More than half of Latin American refineries are classified under “topping” or “hydroskimming” configuration type and only about 20% of them present a “deep conversion” configuration. Latin American refineries are well behind US & Canada reference in terms of upgrading, gasoline quality and desulphurization capacity.
Particularly in upgrading processes, Latin American refineries need to improve in coking, hydrocracking and catalytic cracking capacity. For every barrel per day of atmospheric distillation capacity, there is an average of only one third barrel per day of upgrading capacity, while the US and Canada’s average is 70% higher.