|SThis plot shows U.S. Gulf Coast margins for Light Louisiana
Sweet (LLS) crude oil in a cracking refinery and the margin for heavy Mexican
Maya crude oil (22 API) in a complex cracking and coking refinery. Before the recession, Maya coking margins
grew more than LLS cracking margins because of the increasing light-heavy
crude and product price differentials shown on the previous slide.
|SMargins have collapsed for both in 2009, with weak product
demand, falling utilizations, and rising inventories. Now, the Maya coking margin is not any
higher than the LLS cracking margin, as Maya-LLS price differences have
contracted sharply. There is even some
discretionary reduction in coking inputs.
In the past, the coker was viewed as a high-margin unit by refiners to
be run flat out.
|SWill the relative margins for coking refineries
improve? Much of the crude oil now off
the market is heavy, and when it returns, heavy crude will be less
attractive. But with heavy production
in decline in the Western Hemisphere and growth in conversion capacity, a
return to the heady days of 2005-07 is unlikely unless world demand for
residual fuel oil runs into difficulty because of quality issues such as
reduced sulfur in bunker fuels.
|SThe investment incentive for new coking units is not there