Unprecedented refining margins in recent years encouraged an abundance of refining capacity.
Overcapacity threatens oil refiners with closure
The oil refining industry should prepare for a raft of closures and a steady shift in the global fuel market from petrol to diesel in the next five years, OPEC said yesterday in its annual World Oil Outlook. Unprecedented refining margins in recent years encouraged an abundance of refining capacity that would combine with low oil demand to take much of the industry offline, some permanently. OPEC estimated that refining supply would exceed demand by 5 million barrels per day (bpd) by 2014.
Closures in the order of 7 to 10 million bpd will be needed, predominantly in the US, Canada and Europe, to restore refining viability, OPEC said. Ageing refineries in the West geared to petrol production would be hit particularly hard, OPEC said, because the bulk of new demand in emerging markets would be for diesel, a more efficient transport fuel. The picture in developed countries contrasts with the Middle East, where additional refining capacity will double exports of oil products.
The only region expected to witness continuous growth in net product exports will be the Middle East, OPEC said. Exports of oil products would rise to 5 million bpd by 2030 compared with 2.4 million bpd in 2007, despite rapid increases in domestic demand. Exports of Middle East crude would rise to 21 million bpd from 16.3 million bpd in 2007, OPEC said. The refining industry would require US$780 billion (Dh2.86 trillion) worth of investment by 2030.