New Hart Energy Study: World Refinery Capacity to Grow Despite Recession

HOUSTON, Dec. 7, 2011 /PRNewswire/ -- Major refining capacity expansion projects scheduled for completion within three-to-five years, totaling 9 million barrels per day, will add to the global refining distillation capacity surplus, according to a new report by Hart Energy.  This growth will occur despite recession-related drops in demand for finished fuels and closure of some existing capacity.  

The capacity surplus narrows when it is defined by refined product finishing capacity, such as diesel production and desulfurization capacity for 10ppm sulfur for gasoline and distillate fuels.  This narrow balance of refining finishing capacity is what is keeping global refining margins high.

Within India, for example, where export capacity soared in recent years, there will be continued capacity growth (to nearly 5 million barrels per day) prior to 2015.  Even in low-growth regions of Europe and North America, major projects initiated prior to the more recent retraction in demand will soon come on-line (by 2012-13).

These are a few of the highlights among findings in the 2011 World Refining and Fuels Study (WRFS) to be released Dec. 12 by Hart Energy.  The analysis, which quantifies both gasoline and diesel demand and trade flow by sulfur category, concludes expanding low sulfur diesel demand will challenge refining capability -- and be the primary driver behind future refined product markets and margins.

Speaking to regional trends, Terrence Higgins, Hart Energy's executive director, refining & special projects, noted, "Growth in demand, led by developing regions in Asia, will outstrip these short-term capacity expansions by 2015-17.

"Also, strong growth in Latin American markets, coupled with limited near term refinery projects, will offer market opportunity for surplus U.S. refined products," Higgins said.  "New Brazilian refineries scheduled for later in the decade (2016-17) will supply a much larger portion of the region's needs."

The study further predicts:

• Declining Atlantic Basin gasoline demand will lead to severe competitive pressures in the U.S. East Coast market and rationalization in East Coast and European refining centers.  
• Shale oil development and increasing global condensate production will provide for near-term improvement in average crude oil quality.
• Very heavy crude production, particularly crude from Canadian oil sands, will also expand by as much as 4 mm/bpd, requiring continued expansion of bottoms processing capacity.

The full report covers:

• Country-specific, regional and global production data for crude and NGL and supply to 2030
• Supply and demand (by sulfur limit) for gasoline, naphtha, jet fuel, kerosene, diesel, distillate, marine and residual fuel
• Impact of production, environmental and CO2-related policy requirements on transport fuel quality
• Growth in China, and increasing demand in Asia Pacific and the Middle East
• Brazil's ability to increase crude supply, and output of refined products and advanced biofuels
• Short and long term crude & refined products pricing and margin analysis

For more information on the study findings, methodology and geographical coverage, Terrence Higgins is available for comment at +1.703.891.4815 or [email protected]

For more than 30 years, Hart Energy has been the leader in covering energy news and technology for investors and energy industry executives.  The Houston-based Company provides specialized data/information products and member-only services to targeted audiences worldwide, publishes industry magazines (Oil and Gas Investor, E&P, Midstream Business, FUEL), and produces high-level conferences and energy newsletters, notably the DUG™ conferences, among others.  Hart Energy clients derive from the energy industry, the financial and investment community, engineering and automotive industries, utilities, leading NGOs and the world's major governments.

SOURCE Hart Energy