MTBE (methyl tert-butyl ether)         

  *Barrels per calendar day (bpd) of methyl tert-butyl ether. There are several commercial processes for MTBE production, however, all of them produce MTBE by reacting isobutylene with methanol.

In August, 2002 Conoco and Phillips Petroleum Company merged to become ConocoPhillips.

At the end of 2001, Valero Energy Corporation acquired Ultramar Diamond Shamrock Corporation and its operations in Dumas, Tex. (2,000 bpd MTBE), and Martinez, Calif. (2,500 bpd MTBE). Previously, Diamond Shamrock had acquired the Martinez refinery operations form Tosco. Valero later sold the Martinez refinery to Tesoro Petroleum, in May, 2002.

In 2000, Valero purchased the Benicia, Calif., refinery from ExxonMobile and with it, 3,000 bpd of MTBE capacity.

Chevron and Texaco merged to form ChevronTexaco Corp. in 2001. To secure the commerce regulators’ consent to the deal, Texaco agreed to sell its stakes in its US refining and marketing joint ventures, Equilon and Motiva.

In February, 2001 Coastal Corporation merged with El Paso Energy. The Coastal Chem division still operates under the Coastal name.

In 2000 TotalFina (now AtoFina) sold its Big Spring, Tex., refinery and other assets to Alon Israel. Shortly thereafter, Alon discontinued manufacturing MTBE, eliminating 700 bpd of capacity.

In 2000, BP (then BP Amoco) acquired ARCO (Atlantic Richfield Company) and its Carson, Calif., facility with 3500 bpd MTBE capacity.

Exxon and Mobil merged in 1999 to form a new entity, ExxonMobil. The merger added Mobil’s the 3,300 bpd MTBE unit in Beaumont, Tex., to Exxon’s combined 20,000 bpd at Baton Rouge, La., and Baytown, Tex.

Belvieu Environmental Fuels is jointly owned by Enterprise Products Operating L.P., Mitchell Gas Services, and Sun Refining & Marketing Comapny. It is believed that all MTBE is consumed by Sun Refining.

EGP Fuels is a subsidiary of Enron. Global Octanes is owned by Mitsui and Daicel. Motiva Enterprises is a joint venture of Shell, Saudi Aramco and Texcaco.

Profile Last published 12/28/99; this revision 12/23/02.

DEMAND
2000: 279,000 barrels per calendar day; 2001: 282,000 barrels per calendar day; 2005: 203,000 barrels per calendar day, projected. Demand equals production plus imports (2000: 89,000 barrels per calendar day; 2001: 90,000 barrels per calendar day) less exports (2000: 22,000 barrels per calendar day; 2001: 20,000 barrels per calendar day).

GROWTH
Historical (1996 - 2001): 2.6 percent per year; future -7.9 (negative) percent per year through 2005.

PRICE
Historical (1996 - 2001): High, $1.58 per gallon, spot, f.o.b. gulf coast; low, $0.60 per gallon, same basis. Current, $1.05 per gallon, same basis.

Prices for MTBE shot up in October because of earlier tropical storms in Louisiana, which hurt refinery production, and a decline in the amount of MTBE available for California consumption. Last summer, Alberta Enviro-fuels, a 50/50 joint venture between ChevronTexaco and Finnish energy company Fortum, closed its 18,000 bpd MTBE plant in Edmonton, Alberta, Canada. Before closing, the company supplied 15 to 20 percent of California’s MTBE requirements. Prices climbed as high as a $1.40 per gallon before coming off gradually. Prices have since fallen back to the $1.00 to $1.10 per gallon range.

USES
Gasoline oxygenate for octane enhancement, 99.5 percent; chemical intermediate and solvent, 0.5 percent.

STRENGTH
Producers of MTBE are optimistic that the final version of the energy bill being developed in congress will not include a ban on MTBE. House leaders already voted to reject the ban, which the Senate earlier approved. MTBE producers also expect that plans by some states to ban MTBE will be delayed, as the states wait to see what Congress does with this matter. These other states are watching California as well.

Last March, California Governor Gray Davis delayed for one year the state's deadline for eliminating MTBE from the state’s gasoline pool because of concern over supply availability and lack of adequate infrastructure to transport and blend ethanol – the leading alternative gasoline oxygenate. The decision to postpone the ban until January 1, 2004 came after a report by the California Energy Commission showing the ban could increase gasoline prices 50 percent, to 100 percent. The decision by several major refiners to switch from MTBE to ethanol ahead of the mandated phaseout of MTBE in California has caused ethanol demand to rise, and prices to nearly double.

WEAKNESS
The trouble for MTBE began in 1999 when California Governor Gray Davis announced he would ban the use of MTBE as an oxygenate in gasoline after trace amounts were discovered in the state's drinking water. The MTBE found its way into the drinking water through leaking underground gasoline storage tanks and from the use of two-stroke engines for water recreation vehicles such as jet skis. Leaking tanks containing gasoline blended with MTBE were also blamed for groundwater contamination in several other states. The substance is less volatile and more water soluble than other gasoline components. As a result, traces of MTBE have been found in drinking water supplies.

Earlier this year, BP, ConocoPhillips, ExxonMobil, and Shell announced that they would eliminate MTBE in California a year ahead of the state's January 2004 deadline for completion of the phaseout.

OUTLOOK
As California refineries have already set a valid precedent in replacing MTBE in reformulated gasoline, the decline for MTBE seems certain. Only the timing of the rate of displacement is in other locations is unknown. A Congressional decree in the form of a new energy bill will probably not happen before year-end. When the new and expected legislation does come forth, it is likely that the mandated (1990 Clean Air Act) 2 percent-by-weight oxygenates requirement will be eliminated. This would please the refiners who have argued they can meet air quality standards by other means. Opposed to this is the ethanol lobby who argue that refiners should still have to include some oxygenate in gasoline to improve tailpipe emissions. The projected growth for MTBE over the forecast period is a negative 7.9 percent, through 2005. This is largely based on the California refiner’s decisions to switch to ethanol in 2003.