Industrial Minerals / The Economics of Petroleum Coke, 5th edition 2007

Petroleum coke is a by-product of the oil refining industry and the main factors influencing output are the levels of crude oil production, demand for refined products and the quality of oil extracted from wells and processed in refineries. Global demand for gasoline and other transport fuels is expected to continue rising. At the same time, increasingly stringent environmental regulations are forcing a move to cleaner, more highly refined fuels. Because of these factors, we predict that the long-term growth trend in petroleum coke production will be maintained. These demand-side influences are reflected in the very substantial increases in coking capacity currently planned or underway. Price trends for green petroleum coke also closely mirror those for crude oil, which have been on a steep upward trend since 2001. The effects of Hurricane Katrina in the third quarter of 2005, which reduced new supply and led to a drawdown of inventories, can be clearly seen from the immediate and sharp increase in prices for Gulf Coast coke. In August 2005, spot market prices for 4.5-5% sulphur Gulf Coast coke were US$13-16.50/t. By year-end, they had reached US$30-32/t. Prices continued to rise during 2006, reflecting both the tight supply of coke and rising prices for coal, with which coke competes as a fuel, and in November were at US$46-52/t. The peak was probably reached during the third quarter of 2006 and we anticipate that prices will ease during 2007 and 2008, particularly as new coking capacity is due to come on-stream during that period. The key drivers, issues and developments in the petroleum coke market are analysed in this major new report from Roskill. It provides a clear insight into the industry and its trends and an authoritative analysis of the prospects for the future.

Report highlights

• At the start of 2006, global production capacity for marketable petroleum coke was 82.5Mtpy Close to half of that capacity was located at refineries in the USA. As much as 35Mtpy of new capacity may come on-stream between 2006 and 2010 and by 2012 a total of 45.2Mtpy could have been added. Around 45% of that new capacity will be in Canada and Venezuela, to meet the needs of rapidly growing Alberta oil sands and Orinoco Belt upgrading operations, with another 30% going into conventional refineries in the USA and Mexico.
• An important development in the first half of this decade has been the rise in coke exports from Canada and Venezuela, which has resulted from rapidly growing production by the upgraders. Canada's exports have increased from around 90,000tpy to more than 600,000tpy, while those from Venezuela were 3.5Mt in 2005, compared with 0.9Mt the previous year.
• Globally, around three quarters of petroleum coke consumption is in energy applications, mainly as a refinery fuel (catalyst coke), for electricity generation and for heating cement kilns (marketable coke). Demand for coke in these applications is strong and likely to increase further, albeit with significant regional variations.
• Deregulation of the energy sector in the USA has enabled US power utility companies to increase their use of petroleum coke as a more cost-effective alternative to coal. Consequently, North America has become the largest user of petroleum coke in power generation, with estimated consumption of 8.1Mt in 2005.
• In the industrial sector, the largest use for petroleum coke is as a fuel for cement production. We estimate OECD consumption in cement production at 8.7Mt, a figure that has probably changed little in recent years, as cement production has been fairly stable. At a global level, the greater part of cement output is from non-OECD countries, so total consumption of petroleum coke by this industry is undoubtedly much higher. The largest individual consumer is almost certainly China, which accounted for close to half of world cement output in 2005 and has been responsible for 70% of the growth in production since 2000.
• Global consumption of calcined petroleum coke in aluminium production is estimated at 11-12Mtpy. Aluminium production has been on a steady upward trend for some years and the demand for petroleum coke is expected to continue rising. One area of risk to future demand for petroleum coke in this market is the research being undertaken by the aluminium industry into inert anode technology, which involves no petroleum coke. The successful introduction of such technology could ultimately remove one of the major end uses for high-grade petroleum coke.