Oil refining capacity growing?

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land2341's picture
land2341
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Posts: 402
Oil refining capacity growing?

This makes no sense to me.  With the countries that are in turmoil are countries trying to protect their own ability to refine?  What do they expect to refine if those countries that produce the oil remain in turmoil??  The East Coast of US has another refinery that was closed coming back on line this month.  What could its financial outlook be??

IEA Sees Global Refinery Capacity Outstripping Demand

Published: Jun 16, 2011

By Konstantin Rozhnov 
Of DOW JONES NEWSWIRES 


LONDON (Dow Jones)--Global refinery capacity is expected to increase by 9.6 million barrels a day in 2011 to 2016 mostly driven by economic expansion in Asia and outstripping global demand growth for products, the International Energy Agency said Thursday in its Medium-Term Oil And Gas Markets report.

Capacity will grow 10.3% to 102.7 million barrels a day, the Paris-based agency that represents major energy consuming countries said in its report. Around 95% of these capacity additions are planned in non-OECD countries, particularly in Asia.

"China alone is expected to account for a third of global [refinery capacity] growth, or 3.3 million barrels a day," said the IEA, referring to the 2011 to 2016 period.

Many refinery construction and expansion projects are underway in non-OECD countries, as they try to meet growing domestic demand, said David Wech, head of research at JBC Energy.

He also said that China would eventually be able to satisfy its domestic demand, while India could well go beyond its requirements and start exporting products if all its refinery construction plans go forward.

In the report, the IEA forecast that demand growth for middle distillates, which include diesel, gasoil and kerosene, is expected to be much higher than for other products in 2011 to 2016.

Middle distillates account for more than 50% of total oil product demand growth in the forecast period due to its many uses, said Toril Bosoni, the IEA's senior oil analyst for refining.

"Growth is highly related to economic growth, interfuel substitution, weather conditions and power sector outages," she said.

Interfuel substitution refers to switching from gasoline to diesel, heating oil to natural gas/electricity or from fuel oil bunkers to marine gasoil.

The IEA said it sees global refinery utilization rates declining to 78% on average in 2016 from 82% in 2006 to 2010.

This means that an extra 4.4 million barrels a day of capacity shutdowns or project completion deferrals would be needed for the 2006 to 2010 utilization rates to be reached in 2016, the report said.

These shutdowns and deferrals would predominantly take place in Europe, the U.S. and Japan, Wech said.

Bosoni also said refinery capacity in mature OECD markets would decrease in coming years, as demand was forecast to contract in the medium term in countries across all the regions in the OECD due to various factors including economic difficulties and switching to alternative fuels.

"Simple/smaller refineries in these areas will struggle to compete with large, highly complex new plants in non-OECD countries for export market, increasing [the] pressure to shut plants," she added.

However, Bosoni said the recent change of ownership of many European refineries, where assets have been picked up at distressed prices, could prevent or delay some capacity reductions there.

The IEA said in a separate report, also published Thursday, that global demand for crude from refineries is expected to rise sharply to 76.4 million barrels a day in July from a seasonal low of 72.6 million barrels a day in April.

Demand will increase as U.S. and European refiners come out of maintenance and replenish depleted oil product stocks to meet peak demand in the summer, the monthly oil market report said.

The IEA also said that global oil refining output was set to rise by 2.5 million barrels a day to 76.1 million barrels a day in the third quarter compared with the second quarter.

-By Konstantin Rozhnov, Dow Jones Newswires; +44 207 842 9004; [email protected]

ewilkerson's picture
ewilkerson
Status: Gold Member (Offline)
Joined: Jul 18 2010
Posts: 390
I have a couple educated

I have a couple educated guesses:

  • Some of these countries may want the security of having the refinery within their borders.
  • As we are at or approaching Peak Oil poorer quality sour (High sulfur) oil is coming into use which requires a higher level of refining.
  • With changing sources of crude some refinery locations may not be logistically logical.

Just a few thoughts.

Ernest

land2341's picture
land2341
Status: Gold Member (Offline)
Joined: Aug 20 2009
Posts: 402
Some refinery locations are

Some refinery locations are already becoming problematic as weather events accelerate......

But, that would require countries to be approaching this in some thoughtful manner -- unlikely at best.

ewilkerson's picture
ewilkerson
Status: Gold Member (Offline)
Joined: Jul 18 2010
Posts: 390
Land, You are probably

Land, You are probably right...LOL  It would be too logical.  If we were logical we would be preparing for Peak Oil.

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