World Oil Outlook - Opec
World Oil Outlook - Opec
World Oil Outlook - Opec
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Chapter 8<br />
Downstream investment requirements<br />
The projected investment requirements for the refining sector in this year’s WOO<br />
consist of three major components. The first category relates to identified projects that<br />
are judged to go ahead. The second category comprises capacity additions – over and<br />
above known projects – that are estimated to be required to provide adequate future<br />
refining capacity. And the third category covers maintenance of the global refining<br />
system and capacity replacement.<br />
As set out in Chapter 6, in terms of additional distillation capacity, the global<br />
refining system is projected to expand by 7.2 mb/d, the result of existing projects<br />
coming onstream by 2016, compared to the 2011 base. In addition to distillation<br />
capacity, these projects will add more than 6 mb/d of desulphurization capacity,<br />
4.7 mb/d of conversion capacity and around 1.7 mb/d of combined reforming, alkylation<br />
and isomerization capacity.<br />
The cost of constructing this capacity is assessed to be $230 billion for the period<br />
2012–2016 (Figure 8.1). Of this, the Asia-Pacific region is projected to require<br />
the highest level of investment, close to $90 billion for known projects, with China<br />
alone attracting some $55 billion. Closely following the Asia-Pacific, in terms of investments,<br />
is the Middle East. Investors in the region will spend around $50 billion,<br />
mainly on new grassroots refineries. Latin America has total projected investment<br />
requirements of close to $40 billion. Investments in other regions are significantly<br />
lower, in the range of $10–20 billion, except for Europe where new unit investments<br />
are limited. The main focus here is on desulphurization for diesel plus some limited<br />
conversion and distillation expansion, mainly in Southern and Eastern Europe.<br />
Continued interest in downstream capacity expansion in developing countries<br />
is contributing to the upward movement in construction costs. This is also evident<br />
in the behaviour of the downstream capital costs index (DCCI) developed by IHS<br />
CERA. It rose during 2010 to its pre-economic crisis level of around 180, compared<br />
to the base year 2000, and increased further during 2011 to end the year at 196. Increased<br />
downstream capital costs during 2011 not only reflect the rising price of raw<br />
materials, but also higher labour costs and the premium price contractors needed to<br />
pay for construction equipment due to increased competition between various industry<br />
sectors. A similar rising trend is also evident in the behaviour of the US-oriented<br />
Nelson-Farrar construction index published by the <strong>Oil</strong> and Gas Journal, albeit at<br />
more moderate rates. The DCCI indicates an increase in global construction costs in<br />
221<br />
Chapter<br />
8