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RE: Refinery bottlenecks to last until 2010, warn oil industry, IEA

Home Forums Refining Community Refinery News Refinery bottlenecks to last until 2010, warn oil industry, IEA RE: Refinery bottlenecks to last until 2010, warn oil industry, IEA


Charles Randall

Some recent comments by IEA director on shortage of refinery capacity and the 66 new refineries planned – he is doubtful overall that all the 66 refineries will make it in by 2015 and sees tight capacity until 2010.  IEA is usually a good touch stone on what the Oil industry “herd” is thinking (or not) and seldom creative in their outlooks but this article makes several good points.  
One of the connection’s (indirectly) is that not just the US but globally the refining industry is short of capacity which will allow downstream tightness to put continued pressure on prices that will flow back into crude prices.  (Saudi Models calculate how much crude is worth from downstream prices also). Although there is no shortage in crude compared to peak demand shortfalls in products at times, there is no spare capacity (spare refining capacity has shrunk from 19MM BPD 1980’s down to 7MMBPD in 2002, to currently only 3MMBPD worldwide) in either production or refining – so any major impact to either disrupts the balance and prices.
Another connection is the fact that these high energy prices are starting to produce fears that global economic growth to slow and demand to fall off – I think there are signs that this is already in progress.
One of the things missing from the O&GJ article on 66 refineries and over 500 projects in the refining sector – is of course the impact the ~140 refinery capacity expansions (some 70 crude expansions ) at existing refineries  – along with the other  ~180 enviromental or fuel compliance projects, will contribute to easing capacity & eventual regional surplus capacity at the end of 2015.   Nor does it mention that almost all of the 66 greenfield refineries and lot of the expansions economics depend on exporting gasoline to the US (one of the only major gasoline importer in the world), who has a large number of Brownfield expansions & additions of its own. For example about 40% of 50+ new coker additons that not only enable sizeable crude capacity increase but allow the switch to much cheaper, heavier and more available crudes than the traditional light marker crudes like WTI/Brent/Saudi Light.
As a comparison of the capacity addition the OGJ said the 66 new refineries would add ~12 MMBPD capacity, and the 70 refinery crude expansions would add 18  MMBPD compared to a 15.7 MMBPD demand increase over the 10 years.
So although there is some tunnel vision on the focus there are a lot of key connections as well.
Charlie Randall

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