Global Refining Webinar: Inventories Clearing, Margins Increasing

Researched by Industrial Info Resources (Sugar Land, Texas)--Global refiners throughout the world faced a tough time in the wake of the COVID-19 pandemic as lockdowns, stay-at-home orders and a lack of travel reduced the demand for refined products. However, things seem to be looking up--demand is returning and high inventories are diminishing. In Wednesday's webinar on spending in the global Petroleum Industry, Chris Paschall, Industrial Info's vice president of research for the Refining Industry, and Shaheen Chohan, vice president of Global Analytics, discussed the current trends seen in the industry and what to expect in the near future.

According to Paschall, demand for crude oil in 2020 dropped down to levels not seen since 2014. "As we move through this year and the rest of next year, we're certainly going to rebound and go back to what we were seeing in 2019," said Paschall. He said a recovery in jet fuel demand is expected to be a challenge for the rest of this year, but that in the U.S., gasoline demand had recovered to 90-95% of demand before the pandemic, and had also increased in Europe, mostly for export markets.

Industrial Info is tracking about $428 billion in active global refining projects for the 2021-23 period. A significant amount of this spending is found in South Asia, where India plans to begin construction on a $72 billion refinery in this timeframe. If you are a subscriber to Industrial Info's Global Market Intelligence (GMI) Refining Database, click here to view the project report. Western Asia, where the Middle Eastern countries are making a strong showing, also provides a significant amount of spending.

This high spending activity in Asia is not necessarily good news for the rest of the world's export markets. Increasing demand for refined fuels has been strong in Asia, accounting for large portions of the U.S. and European export markets, which could be lessened when new, grassroot refineries are brought online in these regions.

Spending is less in the more mature markets, thanks to a lack of planned grassroot projects. Paschall said, "When you drop down to the more mature markets, such as the European and U.S. and Canadian markets, you're really looking at unit additions, other in-plant capital (projects), optimization, enhancements ... those types of projects. We really don't see a lot of new capacity being added in the more mature markets right now." In addition, more maintenance spending is being seen for the existing assets in these mature markets.

In regard to maintenance, Industrial Info is expecting about the same number of maintenance projects in 2021 as were seen in 2020--about 4,000 with 2021 start dates. Industrial Info has already tracked about 3,000 planned turnarounds for next year, and this number is expected to grow as this year progresses. More than 500 of these are planned for the U.S. and Canada. "I really think next year and beyond, we're going to see turnaround activity really start to come back into play ... once we eliminate a lot of uncertainty seen in the markets right now," said Paschall.

Paschall also discussed the domestic trend toward renewable fuels as more states begin requiring lower-carbon fuels. "We're going to continue to see the trend toward renewable diesel in the coming years," he said. "I think the biggest concern that you have right now is available feedstock, meaning is there enough used cooking oil out there, is there enough soybean oil out there? ... Those feedstocks are becoming more and more expensive as there's more demand, so this is going to be an interesting market as states continue to mandate lower-carbon fuels."

Other potential challenges in the industry can be seen in the coming wave of electric vehicles. Paschall said in the short term, this wasn't really causing a problem in the market. "But I think longer-term, it's certainly going to be a challenge for refiners as to where to put refined products, specifically gasoline." For most U.S. refiners, about 50% of each barrel of crude oil is refined into gasoline, Paschall said, adding, "I certainly expect it to present a challenge in the coming years."

Click here to watch the complete webinar on demand.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.