Your web browser is out of date. Update your browser for more security,
speed and the best experience on this site.
You have successfully subscribed to the newsletter!
01 17, 2013 by Fuel Fix
Refinery expansion projects could add as much as 9 million barrels a day to the world’s transportation fuel supply over the next five years, according to a report from Hart Energy.
That could mean competition for U.S. exports to Latin America and elsewhere.
But even if all of the expansion projects are completed — and that’s a big if — analysts expect increased demand to absorb the new supply and provide a continuing market for U.S. products, at least for the next few years.
“There are many grand announcements that are made, and then they don’t come to pass,” said Andrew Lipow, president of Lipow Oil Associates.
While demand for gasoline and other refinery products in the U.S. and Europe is flat, it’s rising elsewhere. Demand for low-sulfur diesel is growing especially quickly.
Terrence Higgins, Hart Energy’s executive director for refining and special projects, predicts high demand in China and India, as well as in the Middle East.
Lipow expects demand to grow in Africa, too.
Demand in the United States and Canada is expected to remain flat before eventually declining, which Higgins attributed in part to the government’s higher vehicle fuel efficiency standards. The Hart analysis, “Global Crude, Refining & Clean Transportation Fuels Outlook to 2035,” quantifies both gasoline and diesel demand and trade flow by sulfur category.
Some to shut down
Lipow noted that as some refineries expand, others will shut down, especially smaller plants.
That’s already happening: San Antonio-based Tesoro Corp. announced last week that it will wind down operations at its Kapolei refinery in Hawaii.
Lipow said he expects more refinery closures in Australia, Japan and Europe, even as new projects come online.
Meanwhile, San Antonio-based Valero Energy Corp. is planning to build a new crude topper unit at its Houston refinery to expand its capacity to process light sweet crude oil from the Eagle Ford Shale in South Texas.
The refinery already processes 20,000 to 40,000 barrels a day of crude oil from the Eagle Ford, Valero spokesman Bill Day said, and the expansion would allow it to use more. No construction date has been set, but plans call for the work to be completed by mid-2015.
Refinery expansions are “a constantly evolving target,” said Roger Ihne, a principal at Deloitte. Depending on which expansions actually are built, the projects could have big implications for U.S. refiners, he said.
Mexico and other Latin American states are among the largest markets for U.S. diesel and other refined petroleum products, and Ihne said that shouldn’t change in the next few years as the first major expansions to come online are likely to be in Asia and the Middle East. After that, he said it will depend on where new refineries are built.
“It really is a global market, but we have a competitive advantage in the United States in supplying Latin America and perhaps Europe,” he said.
U.S. refineries can produce about 17.5 million barrels of gasoline, diesel and other petroleum products a day, and Ihne said they run at about 90 percent of capacity.
Domestic demand accounts for most of that, but Ihne said without exports, refineries would operate at lower capacity and less-efficient operations might close.
Just a few years ago, the United States imported gasoline. That’s changed with higher oil production here and in Canada, and Ihne said the boom in natural gas and oil produced from shale has given U.S. refineries a cost advantage over those in other parts of the world.
Refineries use natural gas as a fuel, as well as a feedstock for producing low-sulfur diesel.
“Since our natural gas is so much cheaper, we have a competitive advantage,” Ihne said.
That may not last forever.
Capacity in Mexico
Higgins said expanded refinery capacity in Mexico is likely only to keep up with the growth in demand there without displacing the need for U.S. imports.
But he said planned refinery expansions in Brazil — which could increase diesel refining capacity there by 1.3 million barrels a day — could fill that country’s needs and even take over at least some of the rest of the Latin American market.
Ultimately, Lipow said, U.S. exports will be redirected elsewhere if that happens.
“I’m optimistic that the refining business in the United States is going to continue to benefit,” he said.
Mar 09, 2020 | BIC Magazine | Lori LeBlanc
Mar 06, 2020 | LMOGA
Feb 20, 2020 | LMOGA
Feb 06, 2020 | Lori LeBlanc