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

Joint venture advances plan for grassroots refinery in North Dakota

07/30/2015 Quantum Energy Inc., Tempe, Ariz., and a joint-venture partner Native Son Holdings LLC (NSH), The Woodlands, Tex., have filed a minor-source air qu...

Shell to shed Japanese refining assets

07/30/2015 Royal Dutch Shell PLC has entered a deal to sell nearly all of its interest in Japanese refiner Showa Shell Sekiyu KK to Idemitsu Kosan Co. Ltd. as...

BLM seeks comments on proposed Fidelity E&P Utah oil and gas project

07/30/2015 The US Bureau of Land Management is seeking public comments on Fidelity Exploration & Production Co.’s proposed oil and gas project 17 miles no...

BLM issues draft EA for Noble Energy’s latest DJ basin oil project

07/30/2015 The US Bureau of Land Management released a draft environmental assessment for Noble Energy Inc.’s proposal to develop as many as 89 oil wells in C...

Vermilion Energy farms into German acreage

07/30/2015

Vermillion Energy Inc. has signed a farm-in agreement providing access to a nearly contiguous land block in the North German basin.

PA Resources submits Tunisian field development plan

07/30/2015 PA Resources Tunisia has submitted Tunisian authorities a plan of development for Zarat field that outlines a multiphase joint venture between PA R...

Tawke oil flowing despite pipeline blast

07/30/2015 DNO ASA, Oslo, said oil production from Tawke field in the Kurdistan region of Iraq continues despite shutdown of the pipeline that carries Iraqi c...

Rosneft, ExxonMobil file joint bids for Mozambique offshore contracts

07/30/2015 OAO Rosneft and ExxonMobil Corp. filed joint bids to participate in the fifth licensing round organized by Mozambique’s Institute of National Petro...

Idemitsu Kosan to buy one third of Showa Shell shares

07/30/2015 Idemitsu Kosan Co. Ltd. said it will purchase one third of the voting rights of Showa Shell Sekiyu, Tokyo, from subsidiaries of Royal Dutch Shell P...
White Papers

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

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts

On Demand

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


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

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