MIDDLE EAST REFINING EXPORT BOOST EXPECTED
Middle East national oil companies have announced close to 7 million barrels per day (mbd) of oil refining projects by 2015. This would double Middle East refining capacity. These ambitious plans have three main drivers: to better monetize local heavy oil production, to supply a growing regional market, and to address the mismatch between the profile of demand growth and the global refining system. That mismatch has been a contributing factor to the high oil price environment of recent years. In this Private Report, CERA draws three conclusions:
*Slightly more than half of the planned refining capacity is likely to be built. Due to rising costs, equipment and human resource constraints, and other issues, CERA believes that only 3.3 mbd of the planned 7 mbd of refining capacity will be built by 2015. However, our projected rate of increase in Middle East refining capacity is still more than twice that seen in past decade.
*Product exports will double to 2.7 mbd by 2015, with middle distillates the dominant export product and the gasoline balance switching from imports to exports. The technical choices that each country makes regarding secondary conversion capacity will influence the future oil products balance. Although different national priorities will lead to a blend of refinery types, middle distillates will by 2015 represent close to half the products exported, compared with one third today.
*Minimal new secondary conversion capacity is expected to be added to existing refineries. The trend toward greater refining complexity is seen more in grassroots refining projects than in existing plants. The slowdown in the shift to natural gas for power generation in recent years suggests that fuel oil will continue to play a prominent role in electric power generation. It also accounts for the hesitancy of Middle East refiners to upgrade existing refineries.
