ICF: Refining limits crimping fuel supply

By OGJ editors
HOUSTON, Aug. 17 -- Lack of refinery capacity may become a greater fuel supply problem than availability of crude oil over the next 5-10 years, said ICF Consulting Group Inc., Fairfax, Va.

"The crux of the problem is that new global refinery capacity investment is lagging behind demand," said Zeta Rosenberg, an ICF Consulting senior vice-president and fuels expert. "Historically, the oil industry has been able to squeeze out some additional capacity, but the trend increases of the past may not be enough to keep up with forecasted demand."

She said, "Since mid-2004, refinery margins have stayed very strong, and the outlook appears to be the same for the foreseeable future. If supply does not materialize to meet the demand forecast, however, there could be significant negative impacts on global economies and world demand."

Global refinery capacity has decreased to 103% of total oil demand in 2004 from 109% in 1990 and 107% in 2000. "This situation has been overlooked due to the overall oil price explosion and world crude oil spare production capacity issues," said ICF Consulting.

It noted that the International Energy Agency in Paris forecasts growth in oil demand of more than 5 million b/d by 2010. "Industry has typically expanded existing refineries only marginally every year through low cost expansions (referred to as 'capacity creep'), but capacity creep may become tougher as the world moves to much lower sulfur levels in products in order to meet environmental regulations," the report said.

Based on its analysis of the impact of the Energy Policy Act of 2005 on refiners, ICF Consulting said, "The implications are significant for both the United States and global economies."

In the mid-1980s, the oil industry suffered from a surplus of refinery capacity. "Weak refining margins made investment in new capacity very difficult to justify," said ICF Consulting.

Since 1990, however, the capacity surplus has been slowly wrung out of the global system. "Environmental regulations have contributed to refinery closures, and the strong and steady growth of global oil demand has helped increase refinery utilization," the firm said. "Growth in the demand for clean products—gasoline and particularly diesel—is being fueled by the dramatic rise in the economies of the Far East. These trends are on a collision course."

Related Articles

ESAI: Rising distillation capacity to hasten refinery closures

09/04/2014 A wave of new distillation capacity over the next year will lead to additional refinery closures, particularly for operators in Europe, according t...

CHS plans revamp of Montana refinery

09/04/2014 US farmer-owned cooperative CHS Inc. plans to invest $406 million to boost efficiency and increase diesel production at its 55,000-b/d Laurel, Mont...

ExxonMobil plans upgrade at Norwegian refinery

09/03/2014 ExxonMobil Corp. subsidiary Esso Norge AS is planning to install a residual flash tower designed to replace heavy fuel oil production at its 6 mill...

Rosneft commissions isom unit at Kuibyshev refinery

09/03/2014

OAO Rosneft has commissioned an isomerization (isom) unit at its 6.8 million-tonne/year Kuibyshev refinery in Russia’s Samara region.

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