Vacuum Gas Oil Market: Current Analysis and Forecast (2024-2032)

Vacuum gas oil (VGO) is a feedstock category used in many sectors, mainly the refinery sector, which manufactures many petroleum products. The second type is derived from the vacuum distillation process; the process follows the initial process of atmospheric distillation towers and partial refining of crude oil. VGO is a general mix of hydrocarbons in the mid-range of the boiling point, which can include light products such as diesel and higher boiling point components that may be refined to heavier products such as gasoline. Since the VGO is derived from crude oil, its nature, and characteristics may also differ depending on the quality of the crude oil that has been used and the refining processes that the VGO has undergone; however, VGO is defined based on the boiling point range of 343°C to 538°C (650°F to 1000°F). This makes VGO ideally suited for processing catalytic crackers, hydro crackers, and other units in a refinery to generate valuable fuels and petrochemical feedstock. VGO competes with other products and crude oil, as well as the demand and refining margin, all of which make the product an important link to the global supply of energy.

The Vacuum Gas Oil Market is expected to grow at a significant rate of around 5.4% during the forecast period (2024-2032). The global vacuum gas oil (VGO) market is driven by several factors, among which the rising demand for transportation fuel, the expanding petrochemical sector, and technological enhancements in the refining sector take the limelight. This is because as economies grow and become industrialized, there is an expansion in demand for diesel, jet fuel, and gasoline, which are all derivable from VGO. Further, in the petrochemical industry, VGO is used as a raw material for manufacturing chemicals used in plastic production, thus increasing its demand. Technological factors that affect the refining processes and the conversion process of VGO into high-value products are also areas that have favored the expansion of the market. For instance, in 2021, ExxonMobil planned to invest more than USD 1 billion to convert its existing delayed coker into a hydrocracker unit. This conversion would enable the refinery to process lower-value products like VGO into higher-value diesel and marine fuels. The investment was part of ExxonMobil's strategy to optimize its refining portfolio and enhance the production of cleaner, higher-value products in response to evolving market demand and regulatory requirements.

Based on the product, the market has been divided into light vacuum gas oil (LVGO) and heavy vacuum gas oil (HVGO). The light vacuum gas oil is expected to grow with a significant CAGR in the forecast period (2024-2032) due to the growing demand for gasoline and diesel, burgeoning in the global petrochemical industry, and refinancing technologies. This is a highly preferable feedstock for the manufacturing of gas and diesel to cater to the ever-increasing transport requirements worldwide. Furthermore, LVGO is used in the petrochemical industry as a building block to manufacture chemicals and plastics, increasing its consumption. Fluctuations in the price of crude oil and growing technologies and techniques in the refining business to improve product value from LVGO have contributed to market growth. Further, the investment by the companies to build the market, particularly in the Asia Pacific region, also fuels market growth. For instance, in 2020, Sinopec announced plans to invest approximately USD 6.8 billion to build a new refining and petrochemical complex in Zhanjiang, Guangdong province.

Based on the sulfur content, the market is segmented into low-sulfur and high-sulfur gas oil vacuum. The low-sulfur gas oil vacuum segment dominated the market in the year 2023. The primary impetus for implementing a low-sulfur gas oil vacuum (LSGO) is the demand due to sulfur-content restrictions and environmental and technological factors. Escape regulations like the International Maritime Organization (IMO) sulfur cap mandate, which dictates the maximum level of sulfur contained in marine fuels, have led to the use of LSGO. Traditional fuels contain higher concentrations of sulfur, and therefore, since LSGO does not contain any sulfur, it will not violate these laws in addition to minimizing the emission of sulfur dioxide, which is an air pollutant and results in the formation of acid rain.

Based on the application, the market is segmented into gasoline production and diesel oil production. Diesel is a vital fuel for trucks, buses, trains, and ships, and as economies grow, so does the need for diesel-powered transportation. Additionally, regulatory requirements for cleaner fuels have led to an increased focus on producing diesel with lower sulfur content, which can be achieved by processing VGO. Technological advancements in refining processes have also significantly driven the growth of VGO's diesel production.

For a better understanding of the market adoption of Vacuum Gas Oil, the market is analyzed based on its worldwide presence in countries such as North America (U.S., Canada, and the Rest of North America), Europe (Germany, France, U.K., Spain, Italy, Rest of Europe), Asia-Pacific (China, Japan, India, Rest of Asia-Pacific), Rest of World. North America holds the most significant market share in the market. The growth of vacuum gas oil in North America is driven by several key factors. The growing adoption of vacuum gas oil (VGO) in North America is driven by increasing demand for refined petroleum products such as gasoline, diesel, and jet fuel. Refineries in the region are investing in advanced processing technologies to convert VGO into higher-value products efficiently. This trend is fueled by regulatory pressures to produce cleaner fuels and the need to optimize refining operations to meet market demand. For instance, in 2021, Marathon announced a USD 1.2 billion upgrade to its Garyville refinery in Louisiana, focusing on enhancing its hydrocracking capabilities to process more VGO into ultra-low sulfur diesel and other high-value products. This investment reflects the strategic moves by North American refineries to leverage VGO to produce cleaner and more efficient fuels.

Some of the major players operating in the market include LUKOIL, TAIF-NK, JSC National Company, Par Pacific Holdings, Inc, Neste, Vertex Energy, Honeywell International Inc., Gazprom International Limited, KUWAIT PETROLEUM CORPORATION, and China Yuanda Valve Group Co., Ltd.