Refining Industries in Developing Regions Take Off

While refineries across the US and Europe are forced to upgrade to meet increasingly stringent environmental norms, the future refining industries in the Middle East and Asia are set to explode, according to a new report by oil and gas experts GBI Research.
 
The new report* states that while the crude oil refining industry in developed countries is struggling to cope with slack demand for refined products, stringent environmental regulations, higher investment needs, and expansions in developing countries are being driven by a huge demand for oil.
 
The refining capacity growth in the Asia-Pacific region will be driven by China, India, Indonesia and Malaysia. China and India in particular are expected to expand their refining capabilities to cater to their domestic demand, and intend to turn themselves into major regional refining hubs. Indonesia is instead rapidly expanding its refining capacity to target the export market. A total of around 198.1 MMtpa of additional capacity will be added through new refineries during 2012–2017.
 
The Middle East also represents a major producer and exporter of crude oil, and is now targeting the petroleum products export market. Countries in the region are working on modernizing their existing refineries as well as implementing capacity expansions. Significant capacity additions are expected to come online during the next five years, with industry growth seen most prominently in Iran, Iraq and Saudi Arabia.
 
Newly planned refineries in the Middle East are targeting Western countries as their major export markets, and hold the capability to process heavy crude and produce quality products in accordance with the environmental regulations upheld in developed countries. Subsequently, the refining industry, in the US particularly, is due to face a new wave of competition. The recession-hit refining industry in the US has already witnessed declining margins due to idling and surplus capacity, and the refinery infrastructure improvements planned within the Middle East will lead to surplus capacity and a decline in the refining margins of North American refineries.
 
Global refining capacity is expected to grow at a steady rate, from 4,661.7 Million Metric Tons Per Annum (MMtpa) in 2011 to 5,516.9 MMtpa in 2017, at an Average Annual Growth Rate (AAGR) of 3.1%. Middle Eastern countries are expected to provide a capacity of 183.7 MMtpa by 2017.

Source: GBI Research