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Argus Summit: China, India eye WTI Houston: Correction

22 Jan 2018, 4.52 pm GMT

Argus Summit: China, India eye WTI Houston: Correction

Corrects attribution of LOOP quote to Chen Bo.

Houston, 22 January (Argus) — Chinese refining and petrochemical firm Unipec expects WTI Houston to become a global benchmark as trading liquidity emerges and pipeline connectivity to the US Gulf coast unfolds.

Refiners in Asia Pacific with a growing appetite for oil are pursuing alternatives to crudes from the Middle East and Africa, eyeing grades shipping out of the US Gulf coast, said Unipec president Chen Bo at the Argus Americas Crude Summit in Houston, Texas, today.

US crudes are likely to displace Africa as the second-largest supplier of crude into Asia Pacific by 2020, only surpassed by the Middle East, Chen said.

The US Gulf coast, and Houston in particular, will become the world's most active physical and pricing center, Chen said. Growing liquidity supports WTI Houston becoming a crude benchmark for the Americas and internationally, even better than WTI Cushing.

"Houston is the pricing point, FOB" for US crude Chen said.

Asia Pacific will be adding 4mn b/d of refining capacity between 2017 and 2020, with 3mn b/d of that in China, pushing the country's total capacity to 16mn b/d. Most new refineries will have a preference for light or medium crude as integration with petrochemical trends higher. This does not necessarily mean Canada's heavy crude will have to take a back seat, Chen said, as those grades may be necessary to blend with lighter grades to make a medium grade feedstock before loading for the trans-Pacific journey.

India will be tacking on about 700,000 b/d of new refining capacity by 2020, which has Reliance's head of oil trading Rajaraman J looking to ship more US crude. The ability to eventually load VLCCs at the Louisiana Offshore Oil Port —which Chen expects will happen by February — will help the economics of US crude destined for China and India.

North American grades such as Western Canadian Select (WCS), Mars, Bakken, Louisiana Light Sweet (LLS) all have the potential to displace grades that India currently buys from Africa and the Middle East. But some issues beyond the obvious logistical ones remain.

"You want to get what you're paying for," Rajaraman said, as the predictability of quality is an issue that Reliance and other buyers need assurances on.

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