When is a glut not a glut?

Listening to presentations at this year’s Sulphur conference, it became increasingly clear to me that there is a great deal of uncertainty over sulphur availability over the medium to long term.
On the one hand, there is the familiar story of the continuing threat to the market from large new sulphur-generating projects, particularly in the Middle East. In Abu Dhabi, the Shah sour gas project has been delayed by the withdrawal of ConocoPhillips from the consortium in April, and the timescale has now been pushed back to 2014, but there will nevertheless be 10,000 t/d of sulphur being produced and marketed once it is up and running. In Qatar the Common Sulphur Project is now complete and as new LNG trains and the massive Pearl GTL plant ramp up production, so more gas is processed and more sulphur removed for sale, ultimately planned to reach a figure of 12,000 t/d.
In China development of the Sichuan sour gas fields is proceeding apace, with several million tonnes per year of sulphur to be recovered by the end of the decade, while in the Caspian Sea, huge projects such as Tengiz and Kashagan also have the potential for large sulphur surpluses, and further inland Turkmenistan and Russia are also developing their sour gas reserves. But there are caveats to many of these projects; at the moment all of the sour gas from Tengiz is planned to be re-injected to drive oil production, and there will be no extra sulphur, and Kashagan’s sulphur production has been capped at 3,800 t/a. Delays to major projects occasioned by the financial crisis have pushed back some of these large projects, in the case of Shah, as noted above, by a couple of years at least. At the moment predictions still indicate a significant sulphur surplus over the coming decade, but this has dropped from several million tonnes per year to less than two, and there are also trends in both supply and demand that could cut this still further.
As several speakers noted, for example, the amount of sulphur recovered from natural gas in North America is declining. The boom in low-sulphur shale gas production, which threatens to turn the United States into a gas exporter, has raised output from that source at the same time that production from Canadian sour gas fields continues to decline rapidly. Sulphur extraction from oil sands is being delayed, in Canada by logistical and environmental questions, and in Venezuela by financing and political uncertainty. And all the time, new demand from burgeoning phosphate markets, supported by continuing high phosphate prices, have conspired to keep markets tight. The new Ma’aden project in Saudi Arabia, will now be on-stream by the end of this year, consuming large volumes of sulphur. Some much-delayed nickel leaching projects are also starting up, at Goro in New Caledonia and Ambatovy in Madagascar, again with major sulphur demand for acid production.
There have been dire predictions of a massive glut of sulphur for several years, and yet so far it has not seemed to materialise. Events have conspired to keep sulphur markets tight – perhaps not as tight as the astonishing days of 2008, and yet still tight enough that, as a consequence, f.o.b. sulphur prices are in the vicinity of $200/t and show no signs of falling at present.
Looking to the longer term, as Professor Peter Clark of ASRL has pointed out, continuing substitution of fossil energy by biofuels, renewable energy sources and nuclear, and especially more efficient use of fossil fuels, all actually point to lower sulphur availability in coming decades. Global stockpiles of 20 million tonnes actually only represent a few months’ worth of demand, even if they could all be melted down and sold on. A few years ago it was assumed that sour crude and natural gas processing had sounded the death knell of Frash mining, but sustained prices in their current range could see some of those sulphur mines return to production.