December 07, 2016
Examining Asia-Pacific's Refined Product Demand
Stratas Advisors
Information such as the following is available to subscribers of Stratas Advisors’ Global Refining & Products Service.
Worldwide demand for energy has increased significantly during the last 15 years, driven by population growth and the transition of developing nations into the global
economy. Petroleum has taken largest share of the total energy market and it remains a dominant source of energy, especially in transportation. Gasoline and middle
distillate have been major sources of transport fuel while bunker fuel oil is still above 35% of fuel oil market. The growth in pipeline infrastructure, railways and shipping
industry has played an important role in bridging the supply demand gaps in various regions. The table below indicates the growth in global demand by refined products.
The Asia-Pacific region is the largest global consuming region, representing approximately 33% of global refined product
demand. Petroleum product demand in the region has grown rapidly and will be the leading factor affecting future global
refined product demand.
Asia-Pacific’s refined product demand consists of 69% light products (gasoline, naphtha, jet fuel/kerosene, and middle
distillate). The product mix in the region is oriented toward middle distillates. Jet fuel/kerosene plus middle distillates
account for more than 37% of demand. The gasoline share of demand varies considerably throughout the region, primarily
reflecting various levels of private vehicle ownership. Overall, gasoline accounts for more than 18% of refined product.
Naphtha demand, primarily as a feedstock for petrochemical steam cracking, is substantial and represents a significantly greater product share in the Asia-Pacific region
than in any other region. Residual fuel use is relatively high, similar to other developing regions.
The table below provides a breakdown of Asia-Pacific demand for the six largest consuming countries. The table also
shows historical growth over the past seven years. China alone accounts for 35% of the region’s product demand and has
been, by far, the primary driver of growth in the region.
Together, China and Japan represent 50% of Asia-Pacific demand. For the most part, current refinery conversion and other
downstream capacities in China and Japan are adequate to meet the demand for light product demand. Imports consist
primarily of residual fuel and naphtha. In other countries in the region, naphtha and residual fuel are also the main imported
products. The table below summarizes the 2013 demand for refined product for China, India, Japan and the remainder of
the Asia-Pacific region.
Gasoline demand has more than doubled in China from 2000 to 2014. India has also has significant growth in gasoline demand, but from a much smaller base. Singapore
and South Korea have had almost flat demand while Japan gasoline demand has declined.
Of the other countries in the region Indonesia gasoline demand has increased three times, while the other Asia-Pacific
countries have had relatively flat demand.
China’s on-road diesel demand has also increased more than two times. India’s diesel demand has also increased by a
factor of two. Japan diesel demand has declined while South Korea’s and Singapore’s diesel demand has not changed
much.
On-road diesel demand for Indonesia, Thailand, and Australia has increased. Demand in the rest of the other Asian
countries has been essentially flat.
Naphtha is a major petrochemical feedstock in the Asia-Pacific region and demand has increased as the petrochemical
industry grew in the last decade. Both China and South Korea have robust growth for naphtha demand. In contrast, demand
in Japan and the other developed countries has not changed much.
Demand in Thailand, Taiwan, Indonesia and Malaysia has been increasing during the last decade. The
increased petrochemical demand growth is led by the growing demand for consumer products, including
computer hardware, toys and packaging.
Demand Outlook
Worldwide demand for energy will increase significantly during the next 20 years, driven by population growth and the
ongoing transition of developing economies. Petroleum will decline, in terms of its share of the total energy market, but it
will remain a dominant source of energy, especially in transportation.
The demand for total refined product in the Asia-Pacific region is projected to grow at a rate of 2.2% per year through 2020
and then by 1.5% annually between 2020 and 2035. Gasoline and on-road diesel will increasingly contribute to growth in
the future. Growth for gasoline demand is projected to be 1.6% annually between 2013 and 2035, while the average annual
growth rate for on-road diesel demand is projected to reach 2.3%.
The general trend of product will shift toward middle distillate; and in particular, the on-road portion of middle distillate
product. The figure below shows the Asia-Pacific product mix from 2013 through 2035, along with a bar showing the
incremental product demand over the 2013-2035 period. The general trend will be a shift toward middle distillate, and in
particular, the on-road portion of middle distillate product. The heavy fuel oil share will decline from 11% to 7% of the
product mix, a reduction similar to other regions. Middle distillate will represent 42% of incremental product demand.
China and Japan are the largest markets in the region and the second- and third-largest petroleum consumers worldwide, respectively, behind the U.S. The top six
consumers of the Asia-Pacific region (China, Japan, India, Indonesia, South Korea, and Australia/New Zealand) represent 80% of demand in the region.
Asia-Pacific gasoline demand accounts for 23% of global gasoline consumption. Driven by vehicle fleet growth between
2013 and 2020, gasoline demand is projected to grow at an average rate of 2.3% annually and 1.3% afterward through
2035. The growth is much higher in countries with rapidly expanding populations and economies such as China. In contrast,
Japan, the second-largest gasoline consumer in the region, is experiencing shrinkage in gasoline demand.
Though strong growth in passenger travel is expected to continue, it is also expected that developing economies in the
region will also implement measures to curb oil consumption. Efficiency requirements and fuel substitutions (i.e.,
electrification) are projected to slow the pace of growth in the gasoline market in the longer term.
In Asia-Pacific, the on-road diesel portion was 56% of the total middle distillate demand in 2013. Middle distillate has
experienced high growth, increasing at an average of 3.6% annually between 2010 and 2013. On-road diesel grew at an
average of 7.1% per year during the same time period. In going forward, between 2013 and 2020 the middle distillate
demand will grow 2.6% annually and further at annual growth rate of 2.0% through 2035.
Although many of the primary consumers in the region are oriented toward gasoline in the transportation sector, the region
will experience relatively high diesel growth driven by economic expansion and increases in heavy-duty diesel use. Some
dieselization is expected in lighter commercial trucks. Asia-Pacific on-road diesel demand is projected to ggrow 2.9%
annually through 2020, while it will grow 2.0% annually between 2020 and 2035.
Asia-Pacific is the largest naphtha consumer in the world, representing 63% of global demand. Naphtha is primary used as a steam cracker feed for the region’s booming
petrochemical industry. Naphtha demand grew by an average of 2.6% per year between 2010 and 2013.
Petrochemical demand growth will continue to be strong, and naphtha will provide a significant contribution to feedstock
compared with liquefied petroleum gas (LPG). Naphtha demand is projected to grow 1.4% annually between 2013 and
2020 and then by 0.9% between 2020 and 2035.
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