Increasing Global Diesel Demand Drives Refinery Expansions and Upgrades

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Researched by Industrial Info Resources (Sugar Land, Texas)--Increased global demand for diesel has brought about a dramatic increase in U.S. exports of distillate fuels (which include diesel and heating oil) and is helping drive refinery expansion projects throughout the country. According to the U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, U.S. distillate exports, which have increased since 2003, began a significant upward trajectory in 2008, when exports rose 97% year over year, from an average of 268,000 barrels per day (BBL/d) in 2007 to 528,000 BBL/d in 2008.

This strong upward trend in export demand has continued since that time. In 2010, an average of 656,000 BBL/d of distillate fuel was exported from the U.S., and the EIA reports that from January through June this year, the U.S. exported an average of 730,000 BBL/d of distillate fuels, a 32% increase from the same period in 2010.

Click on image at right for a breakdown of destinations for U.S. distillate fuel exports from 2003 through 2010.

Central and South American countries have consistently been the largest importer of U.S. distillates, accounting for 311,000 BBL/d, or 47%, of U.S. distillate fuel exports in 2010. In terms of individual countries, Mexico and the Netherlands are among the top importers of U.S. distillate fuel. In 2010, Mexico imported an average of 94,000 BBL/d, while the Netherlands imported an average of 110,000 BBL/d, much of which was probably transported to other countries in Western Europe. According to the EIA, "Combined exports to the Netherlands, Mexico, and Central and South America represent about 83% of the increase in U.S. distillate exports since 2003."

The consistent strengthening of the export market has been caused by various factors. Developing economies in Asia and many Latin American countries have seen huge economic growth since the end of the global financial crisis. In many cases, the demand for diesel has far exceeded the available refining capacity in these countries. In addition, increasingly strict regulations regarding the sulfur content of diesel fuel sold in Europe have effectively removed European sales from refiners outside of the U.S. and Europe that are unable to produce diesel that meets these regulations.

The strong global demand for diesel has driven up the price for the fuel, consequently making increased diesel production an economically attractive investment opportunity for many refineries, both in and outside of the U.S.

Globally, Industrial Info is tracking more than $12 billion in capital projects to increase diesel production or produce higher-grade diesel. Most of these projects entail the additions of diesel hydrotreaters or the upgrading of existing units, and in some instances, the addition of desulfurization units to produce higher-grade diesel. More than half of this spending is for projects in Asia. Industrial Info is tracking more than $1.6 billion in diesel expansion projects in North America, $860 million of which are in the U.S., with the remainder in Mexico and Canada.

Click on image at left for a breakdown by world region of active diesel expansion and upgrade projects.

Companies such as Suncor Energy Incorporated (NYSE:SU) (Calgary, Alberta), Hess Corporation (NYSE:HES) (New York, New York), Pasadena Refining System Incorporated (Pasadena, Texas) and others are planning major diesel hydrotreater addition projects that will kick off in the next one to two years.

Industrial Info's North American Petroleum Refining Industry Wall Map, 6th Edition provides detailed refinery listings, including plant details such as startup date, telephone number and employee count, as well as spending activity, including active project count, TIV, and spending category: capital, maintenance or both. The map also provides details on production capability, showing crude processing units and designed capacity, as well as the upgrading units present at the facilities.

For more information, or to order this or one of our other laminated, high-resolution inkjet wall maps, visit Industrial Info's Online Store or call 1-800-762-3361. Our International Petroleum Refining Database provides details about refineries and past, present and future refining projects throughout the world.

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