World Oil Outlook - Opec

Chapter 6
Medium-term refining outlook
Assessment of refining capacity expansion – review of existing projects
Since its first edition in 2007, the annual WOO has increasingly emphasized the ongoing
shift in future refining capacity from developed OECD regions to developing
countries, especially those in Asia and the Middle East. The continuation of this trend
has been even more evident over the past year, an additional and second dimension to
the shift is progressively emerging. Until mid-2011, the story was mainly about capacity
additions in Asia and the relatively stagnant levels of refining capacity in the US, Europe
and Japan. Limited capacity additions in industrialized countries were being offset by
occasional refinery closures, some of them temporary – while the refinery was put up for
sale – others permanent.
However, developments have accelerated in the second half of 2011 and in 2012,
both in terms of additions and closures. In the OECD regions, substantial refining
capacity rationalization has materialized. By the end of 2011, capacity closures for the
year passed the 1 mb/d mark, bringing cumulative shutdowns since 2008 to more
than 2 mb/d. Although information about closures, sales and restarts can often change
on an almost weekly basis, a current assessment indicates that another 1.5 mb/d of
distillation capacity will be permanently closed in 2012. On the other side, there are
more new refinery projects now on the list than before, and overwhelmingly in developing
countries. In recent years, these projects were concentrated mainly in Asia.
While the region still dominates future capacity additions, shifting the medium-term
forecast horizon ahead by one year (from 2015 to 2016) brings in new projects to be
built in the Middle East, Latin America and Africa. These are in line with demand
increases in those regions, combined with an emerging trend among crude producers
to refine domestically especially heavier crudes.
The summary of assessed capacity additions from existing projects is presented
in Table 6.1 and Figure 6.1. It is estimated that around 7.2 mb/d of new crude distillation
capacity will be added to the global refining system in the period to 2016. The
greatest portion of this new capacity is expected to materialize in Asia, mainly in China
and India, which together account for more than 40%, or 3.2 mb/d, of additional
capacity. Indeed, over the next five years, China alone will expand its refining sector
by more than 2 mb/d, in line with the objectives specified in its 12 th Five-Year Plan
(FYP). Significant capacity additions will also be achieved in India, which dominates
(from the perspective of refining expansion) the ‘Other Asia’ region. The high proportion
of total capacity additions in these two countries is a continuation of a trend
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