Methyl Tertiary-Butyl Ether (MTBE):Conditions Affecting the ...

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Executive Summary The U.S. International Trade Commission (Commission) instituted this investigation on January 27, 1999, following receipt on December 23, 1998, of a letter from the United States Trade Representative (USTR) requesting that the Commission conduct an investigation under section 332 (g) of the Tariff Act of 1930 (19 U.S.C. 1332(g)) and provide a report concerning conditions affecting the U.S. methyl tertiary-butyl ether (MTBE) industry. The Commission was requested to provide the report within 9 months of receipt of the letter, or by September 23, 1999. USTR requested that the Commission provide the following information in its report, to the extent that such information is available: (1) An overview of the global market for MTBE, including consumption, production, capacity, and trade trends during 1994-98, emphasizing the United States and Saudi Arabia. (2) A description of the domestic MTBE market, and the major factors affecting it, including imports of MTBE, especially from Saudi Arabia. (3) An overview of the current MTBE production processes, with information on costs of production, including those of its major raw material components, and the principal sources of these feedstocks in the United States, as well as in Saudi Arabia. (4) Profiles of the U.S. and Saudi Arabian MTBE industries and importers, including information on their patterns of ownership and investment, as well as Government policies affecting production, investment, and trade of MTBE. Examples of such policies would be industrial policies, trade policies, and other governmental measures that may affect the cost of raw materials, transportation, and other relevant competitive factors. In the request letter, USTR noted that the United States is a significant producer and consumer of MTBE, a chemical used primarily as an oxygenate for gasoline. USTR stated that U.S. producers of MTBE have expressed concerns about competitive conditions affecting their industry, including increased MTBE imports from Saudi Arabia, and that the “producers believe that these increased imports are the indirect result of the Saudi Arabian Government’s provision of butane feedstock to Saudi MTBE producers at a substantial discount to world market prices.” Product Coverage ‘ MTBE is a synthetic organic chemical used primarily as an oxygenate. Oxygenates are generally defined as any substances (usually ethers, such as MTBE, or alcohols, such as fuel ethanol) which, when added to gasoline, increase the amount of oxygen in that gasoline blend. The use of oxygenates in the United States increased during the early 1990s largely as a result of the Clean Air Act Amendments of 1990 (CAAA), which, among other things, called for the addition of oxygen to gasoline to reduce carbon monoxide emissions and other air pollutants. MTBE is used in over 85 percent of reformulated gasoline (RFG); ethanol is used in much of the remainder. In turn, RFG vii
accounts for about 30 percent of U.S. gasoline demand. 2 2 Reformulated gasoline must contain at least 2 percent oxygen by weight and no more than 1 percent benzene by volume. World Overview ‘ Major MTBE net exporters all have large production capacities, including, with one exception, chemical plant production. Levels of domestic consumption in these countries vary, but in all cases is relatively small. Saudi Arabia is the world’s largest net exporter of MTBE. Other major net exporting nations for 1994-98 included Venezuela, the United Arab Emirates, Malaysia, Canada, the Netherlands, France, and China. ‘ Nations with nearly balanced MTBE trade have production limited to refineries and generally do not have domestic oxygenate requirements. The majority of countries which trade MTBE are in this group. These countries have a wide variety of profiles in terms of domestic production and use, but they share two common attributes: a lack of large-scale chemical plant MTBE production and relatively minor petroleum and natural gas resources. This group of 21 countries includes Argentina, Brazil, most of both Eastern and Western Europe, Japan, and Korea. ‘ Major MTBE importing countries vary, but all use MTBE domestically to address airquality concerns. The United States is the world’s largest importer of MTBE. Other major net importers include Finland, Italy, Taiwan, Thailand, Mexico, Denmark, Norway, and Switzerland. In the larger countries, domestic production is substantial, although domestic demand, resulting from high levels of gasoline use and strict clean-air regulation, has outpaced domestic supply. U.S. MTBE Industry, Market, and Factors Affecting the Market ‘ The U.S. MTBE industry is the largest in the world. Its production of 186,400 barrels per day in 1998 was about 3.5 times more than the production volume of Saudi Arabia, the next largest producer. Construction of new domestic production facilities in the United States, however, has been discouraged by uncertainty concerning future U.S. consumption and recent increases in global production capacity. ‘ The U.S. MTBE market is also the largest in the world, primarily because of the U.S. position as the world’s largest gasoline market and U.S. regulations mandating a minimum oxygen content for much of this gasoline. The oxygenated gasoline and RFG programs, implemented under the CAAA, and the California Air Resources Board (CARB) Phase 2 gasoline program were largely responsible for the significant growth in U.S. consumption of MTBE during much of the 1990s. viii
Page 1 and 2: Methyl Tertiary-Butyl Ether (MTBE):
Page 3 and 4: ITC READER SATISFACTION SURVEY Meth
Page 5 and 6: U.S. International Trade Commission
Page 8 and 9: TABLE OF CONTENTS iii Page Abstract
Page 10: Tables-Continued TABLE OF CONTENTS-
Page 15 and 16: volatile organic compound emissions
Page 17 and 18: gases in Saudi Arabia regardless of
Page 19 and 20: Register (64 F.R. 5312) of February
Page 21 and 22: eportedly purchased imported MTBE d
Page 23 and 24: Table 1-1. The four main sources of
Page 25 and 26: Table 2-1 MTBE production levels of
Page 27 and 28: Saudi Arabia, 13 Venezuela, the UAE
Page 29 and 30: The third group of countries, the m
Page 31 and 32: (1) in refineries using either thei
Page 33 and 34: production capacity is fairly recen
Page 35 and 36: Table 3-2 31 (...continued) In the
Page 37 and 38: Table 3-3 The cost of producing MTB
Page 39 and 40: accounted for approximately 94 perc
Page 41 and 42: exploring their options regarding a
Page 43 and 44: Table 3-7 U.S. MTBE import-to-consu
Page 45 and 46: Table 3-10 Average monthly and annu
Page 47 and 48: Table 3-12 Components of LDP unit v
Page 49 and 50: Transportation Costs Practically al
Page 51 and 52: Source: Compiled by the Commission
Page 53 and 54: the section describes health and en
Page 55 and 56: volume, 90 and contain no lead or h
Page 57 and 58: that opted in to the program, 112 m
Page 59 and 60: appendixes H and J). In addition, t
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prohibit the use of jet skis and, i
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produce disruptions in the fuel sup
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According to one source, the “vol
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level almost reached the record hig
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Europe consider ethanol to be too c
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TAME is produced in about five to s
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our continued economic growth.” 4
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with $5.5 billion in 1996. 17 As of
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Port in Madinat Al-Jubail. 35 Both
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Alujain was to have held about 30 p
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(presented in descending order). 59
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Using minimum estimated operating r
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The cost of producing MTBE from n-b
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Table 4-3 Butane dehydrogenation pr
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consumed domestically “as fuel an
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price would be determined by deduct
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Government Policies This section pr
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e available to all sectors in the K
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intent of the investment condition
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that “this is only a limited cush
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In another argument, several source
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Opinions within the industry differ
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4-34
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Appendix C Witness List
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Appendix D Glossary
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Gulf Cooperation Council (GCC)-the
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D-4
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MTBE Production Processes STEAM CRA
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Figure E-2 is not available in the
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dehydrated to form isobutylene) or
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Appendix F U.S. Production and Cons
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Table F-1 U.S. methanol producers,
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Table F-3 U.S. methanol production,
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increased during this period; Canad
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another 3 to 5 percent is reportedl
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2 percent. This growth rate was in
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Table F-6 Annual production of liqu
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Table F-7 U.S. annual production, t
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Appendix G U.S. Tariff Treatment an
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Appendix H Chronology of Events Rel
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Year MTBE-related incidents, academ
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Chronology of Events Related to the
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Appendix J Legislation and Other Ac
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Jersey introduced legislation that
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