Argus Media Limited

12/28/2023 | News release | Distributed by Public on 12/28/2023 11:43

point: Neat or not, Mexico needs US-made MTBE

The planned startup next year of Mexico's Olmeca refinery is set to strengthen the role of US-made additive MTBE as a vital part of the US southern neighbor's fuel mix.

Mexico is the largest importer of US MTBE, taking in nearly two-thirds of all US production. US exports of MTBE to Mexico totaled just under 1.2mn t year to date October, up by 26pc from the same 10-month period last year.

The 340,000 b/d Olmeca refinery, after many delays, is slated to start up in the first quarter of 2024, which will only further boost demand for the oxygenate.

Mexico's domestic gasoline demand varies between 650,000 b/d and 850,000 b/d, according to the energy ministry. Mexico's six working refineries have capacity to process 1.627mn b/d, according to state-controlled Pemex, but they operate below 50pc capacity and produce way less than demand because of lack of investment to update aging equipment. Mexico imports the shortfall.

But if delays persist at the Olmeca refinery, Mexico will need both finished gasoline blended with MTBE and neat MTBE to supplement incremental gasoline production.

MTBE is a gasoline additive that lifts the octane content and allows for a more complete combustion of gasoline components. Its use is mandated in dense cities in Mexico, including Mexico City, Guadalajara and Monterrey, to reduce tailpipe emissions.

Mexico's state-owned Pemex does not produce any MTBE, but requires MTBE to finish gasoline produced at its refineries. Even with the new Olmeca refinery, there are no plans to upgrade or restart old MTBE units at Mexico's six other established refineries. This heightens the need to import the octane booster, whether blended into gasoline ahead of reaching Mexico or importing neat MTBE and finishing the blending there.

Mexico's reliance on MTBE can affect its price, as periods of sharp demand will send the premium up and slackening demand will push it lower.

MTBE is typically priced at a differential to benchmark gasoline futures. This year there was sharp volatility in that differential. In September, the premium spiked to 185¢/USG above Nymex RBOB futures as demand from Mexico surged. But by early November, the premium fell to around 20¢/USG as demand from Mexico fell.

US MTBE output

Domestic MTBE production in the US has risen sharply this year with the startup of LyondellBasell's propylene oxide/tertiary butyl alcohol (TBA) project in Texas. The 140-acre Channelview, Texas, facility started up in March and carries a nameplate capacity of 1mn t/yr of TBA. Other MTBE producers include Enterprise Products, TPC Group, Indorama and ExxonMobil.

US MTBE production is expected to average higher in 2024 with a full year of production from LyondellBasell's TBA and octane-enhancing units.

However, there are some turnarounds scheduled for the first quarter of 2024 that could limit how much MTBE supplies increase.

But no matter the amount of MTBE made in the US in 2024, Mexico will be in the driver's seat for US MTBE makers next year and beyond.

By Steven McGinn