Released October 07, 2019 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The global petroleum refining industry has aggressive plans to invest billions of dollars to construct new refineries or expand existing ones, but in a world where crude oil supply already exceeds demand, there are questions about how many planned projects will make it through construction and begin operating, Chris Paschall, Industrial Info's vice president of research for the global Oil & Gas and Petroleum Refining industries, said on a webcast Thursday.
Drawing on Industrial Info's global database of industrial projects, Paschall said there are 653 refinery projects worth more than $104 billion being built today. The regions with the greatest value of refinery projects under construction include Western Asia ($30.5 billion), East Asia ($26.2 billion), Africa ($9.35 billion) and Russia ($9 billion).
Another 3,271 capital projects worth more than $274 billion are scheduled to begin construction in 2020 or 2021, he added. These projects are in the planning or design stages.
If all the refining capacity that is under construction and planned came online, by 2027 it would add nearly 27 million barrels per day (BBL/d) of new refining capacity to the roughly 100 million BBL/d of capacity that already exists. "Not all of that new capacity is needed, and the market will have a tough time absorbing all that planned new capacity," Paschall commented. "As the market turns softer and developers face lots of headwinds, some projects may experience trouble securing financing."
Click on the image at right to see a projection of planned new crude oil refining capacity.
While 2020-2021 may look like a robust time for refinery capital project spending, Paschall reminded the audience that not all planned projects make it through the development process to construction and operation. Some projects are delayed and others are cancelled. Some of those delayed or cancelled projects may be replaced by other planned projects. "We never expect all planned projects will make it through to operation," he told listeners. "Project development is very dynamic."
This shakeout may be particularly harsh because, right now, the world's supply of crude oil is exceeding demand, leading to softer crude oil prices and, in some markets, weak refining margins.
At this point, global supply of crude exceeds global demand by slightly less than 2.5 million barrels per day (BBL/d), and that surplus is projected to continue rising, Paschall told the webcast attendees. He said he didn't think the world would go through a repeat of 2014, when slowing demand growth and excess supply caused a price collapse, but he did note that the world's leading economies have been slowing down the last year. "No one is sure where the (economic) floor is, so stay tuned," he commented.
Click on the image at right to see a supply-demand chart for crude oil.
Looking around the world, Paschall offered listeners this summary of refinery project activity over the next 24 months:
The IIR expert also noted that refineries are increasingly diversifying to create new revenue streams, such as in petrochemicals and exports. "Refiners need to continue diversifying and connecting their output to petrochemical facilities. Optimization is the word of the day for refiners."
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. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Drawing on Industrial Info's global database of industrial projects, Paschall said there are 653 refinery projects worth more than $104 billion being built today. The regions with the greatest value of refinery projects under construction include Western Asia ($30.5 billion), East Asia ($26.2 billion), Africa ($9.35 billion) and Russia ($9 billion).
Another 3,271 capital projects worth more than $274 billion are scheduled to begin construction in 2020 or 2021, he added. These projects are in the planning or design stages.
If all the refining capacity that is under construction and planned came online, by 2027 it would add nearly 27 million barrels per day (BBL/d) of new refining capacity to the roughly 100 million BBL/d of capacity that already exists. "Not all of that new capacity is needed, and the market will have a tough time absorbing all that planned new capacity," Paschall commented. "As the market turns softer and developers face lots of headwinds, some projects may experience trouble securing financing."
Click on the image at right to see a projection of planned new crude oil refining capacity.While 2020-2021 may look like a robust time for refinery capital project spending, Paschall reminded the audience that not all planned projects make it through the development process to construction and operation. Some projects are delayed and others are cancelled. Some of those delayed or cancelled projects may be replaced by other planned projects. "We never expect all planned projects will make it through to operation," he told listeners. "Project development is very dynamic."
This shakeout may be particularly harsh because, right now, the world's supply of crude oil is exceeding demand, leading to softer crude oil prices and, in some markets, weak refining margins.
At this point, global supply of crude exceeds global demand by slightly less than 2.5 million barrels per day (BBL/d), and that surplus is projected to continue rising, Paschall told the webcast attendees. He said he didn't think the world would go through a repeat of 2014, when slowing demand growth and excess supply caused a price collapse, but he did note that the world's leading economies have been slowing down the last year. "No one is sure where the (economic) floor is, so stay tuned," he commented.
Click on the image at right to see a supply-demand chart for crude oil.Looking around the world, Paschall offered listeners this summary of refinery project activity over the next 24 months:
- South Asia: $41.7 billion of projects are scheduled to kick off construction over the 2020-2021 period, including $14.4 billion of grassroot projects, $20.3 billion of plant expansions and $6.3 billion of unit additions.
- Western Asia (including Iran): $40 billion of projects are scheduled to begin turning dirt by the end of 2021, including $25 billion of grassroot projects, $6.3 billion of plant expansions and $7.23 billion of unit additions.
- Southeast Asia: By yearend 2021, about $39.3 billion of refinery projects are scheduled to begin construction, including $12.2 billion in grassroot projects, $19.8 billion of plant expansions and $6 billion of unit additions.
- East Asia: About $36.6 billion of refinery projects are scheduled to begin construction in this region in 2020 and 2021. This includes $1.6 billion in grassroot projects, $19.1 billion of plant expansions and $15 billion of unit additions.
- North America: An estimated $27.7 billion of refinery projects are scheduled to begin turning dirt in 2020-21, including $12.7 billion of grassroot projects, $2.5 billion in plant expansions and $7.5 billion in new additions.
- Europe: This region is expected to see $14.6 billion of refinery project activity, including $5.1 billion of grassroot construction, $7.4 billion of unit additions and less than $50 million of plant expansions.
The IIR expert also noted that refineries are increasingly diversifying to create new revenue streams, such as in petrochemicals and exports. "Refiners need to continue diversifying and connecting their output to petrochemical facilities. Optimization is the word of the day for refiners."
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. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
