An additional 11.7 million barrels per day (mmbd) of Crude Distillation Capacity (CDU) will come online globally between 2014 and 2020, with an annual average of 1.6 mmbd, says a new report from GlobalData.
Increases in predicted refining capacity from 2015-2019 are significantly higher than the forecasted long-term annual oil demand growth, a dynamic which will impact negatively upon refining margins, it is claimed.
The projection comes at a time of heightened focus on the future of the chemicals sector in Europe, for example, as fears arise about a combination of trends that leave the region in an uncompetitive position.
GlobalData’s report, titled Global Refining Capital Expenditures Forecast to 2020, states that with an additional CDU of 3.1 mmbd planned between 2014 and 2020, the Middle East will be the largest contributor to the world’s total capacity increase – accounting for approximately 27%.
Meanwhile, refining additions in Asia, which include China with 2.6 mmbd, represent 22% of the global total, India with 1.9 mmbd (17%) and All Other Asia with 1.7 mmbd (15%), will amount to over 50% of the overall growth in refining capacity.
Carmine Rositano, GlobalData’s Managing Analyst covering Downstream Oil & Gas, says, “As Asia will remain the world’s oil demand growth engine through 2020, this figure is unsurprising. Thanks mainly to the start-up of large-scale projects in the Middle East and Asia, these regions will contribute a combined 80% of new capacity, with refining balances further tilting to East of the Suez areas.”
“Eight large-scale refining projects with at least 300 thousand barrels per day of capacity are expected to begin operations globally, with seven of these projects coming online between 2018 and 2020. This will push the annual increase in global refining capacity to its highest level by the end of the forecast period, with 2.8 mmbd forecast to be added in 2018.”
GlobalData states that approximately half of the remaining 20% of incremental refining capacity will come from Latin America, as a result of new grass-root projects in Brazil and refinery expansions in Colombia, Ecuador and Peru. The US and Former Soviet Union will each account for 3% of the world’s capacity, thanks to small projects, including condensate splitters, in the US and the construction of new refineries in Russia and Turkmenistan, along with an expansion project in Estonia.
Rositano concludes, “Overall, the increases in predicted refining capacity from 2015 through to the end of 2019 are significantly higher than the forecasted long-term annual oil demand growth of 1.2 mmbd to 1.4 mmbd. This will impact negatively upon refining margins and likely cause additional refinery closures, or lower refining utilisation levels, in other areas of the world, including Europe.”
The future of the European chemicals sector was brought into the spotlight earlier this year when INEOS Chairman Jim Ratcliffe authored an open letter of concern to the President of the European Commission, José Manuel Barroso.
In his open letter, Ratcliffe expressed his ‘deepest concerns’ about the future of the industry in the region and his fear that much of it will face closure within the next 10 years. Read more about the reasons behind that letter in gasworld’s recent hot topic, Call to action for future of European chemicals sector (see link, left).