UOP: Refining industry will eventually recover from low margins

David Nakamura
Refining/Petrochemical Editor

Houston, Jan. 28 -- The refining industry may have to wait until 2005 for a significant improvement in margins, according to Carlos Cabrera, UOP LLC senior vice-president, refining and petrochemicals. Cabrera gave one of three keynote presentations at the Daratech Plant 2003 conference here Monday.

The oil industry has suffered from low oil demand growth for the past few years, a trend that continued in 2002. "China accounted for 80% of 2002 growth," Cabrera said. Excluding this demand increase in China, the fact that the rest of the world accounted for only 20% of oil demand growth is very low by historical standards, he noted.

Oil demand growth rates should return to historical trend levels in 2003-04, but it is "contingent on the resumption of economic growth," Cabrera noted. During the past 50 years, worldwide economic growth has averaged about 3.5%/year, despite problems and crises similar to what occurred in 2001. Cabrera said that this economic growth will continue to drive energy and oil consumption.

There are threats to a global economic recovery, Cabrera noted. The "loss of consumer confidence due to continuing imbalances in the US economy" and a "prolonged oil price spike as a result of Iraq military action," Cabrera said, are the risks to global economic growth returning to historical trends.

However, the "global economic recovery will continue, despite prospects of disruptive conflicts," Cabrera said.

Refining margins
Refining margins were poor in all main trading centers throughout 2002 after an increase in 2000. Cabrera indicated declining cracking margins for Brent (Northwest Europe), Urals (Mediterranean), West Texas Intermediate (US Gulf Coast), and Dubai (Singapore) crudes. Cracking margins did pick up near the end of 2002, but Cabrera attributed this to extensive maintenance outages.

Margins in most areas of the world have been below the required return-on-capital investment threshold since the early 1990s. Cabrera said he sees "no signals of changing fundamentals going forward into 2003-04."

In 2002, global refinery utilization dropped slightly. This was because capacity creep exceeded demand increases, according to Cabrera.

The decreasing utilization rate will reduce the impetus for investments in new capacity, Cabrera said. And if no grassroots capacity comes online, the global utilization rate should begin to tighten in early 2004. Cabrera predicts a refinery utilization rate of around 92% in 2004, assuming no new capacity. The 2002 level was less than 90%.

"[Capacity] creep, low-cost revamps, and catalyst changeouts will meet capacity needs for the next few years," Cabrera noted. "Technology will focus on maximizing use of existing assets."

However, "new refineries will be required in the 2006-10 time frame," he concluded.

Related Articles

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

SIBUR plans MTBE expansion at Togliattikauchuk

07/01/2015 Russian conglomerate OAO SIBUR Holding, Moscow, has started preparatory work for a project designed to expand production capacity for methyl tertia...

OxyChem-Mexichem JV lets contract for ethylene storage

06/30/2015 Ingleside Ethylene LLC, a 50-50 joint venture of Occidental Chemical Corp. (OxyChem) and Mexichem SAB de CV (Mexichem), has let a contract to CB&am...

Forum extends study of subsea integrity

06/30/2015

Work by an industry forum called SURF IM Network, which studies oil and gas subsea integrity management, has been extended by 3 years.

Survey begins of collaboration on the UKCS

06/30/2015

Deloitte has begun a survey about collaboration in the oil and gas producing industry of the UK Continental Shelf.

Lytle named to Canada’s National Energy Board

06/30/2015

Murray Lytle has been appointed as a full-time member of Canada’s National Energy Board for a term of 7 years, effective July 6.

White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected