A wave of new distillation capacity over the next year will lead to additional refinery closures, particularly for operators in Europe, according to a recent report from ESAI Energy LLC.
Compared with capacity growth of less than 300,000 b/d during the past year, the addition of nearly 2 million b/d in global distillation capacity over the next 12 months will undermine the profitability of marginal European refiners, who will be under pressure to reduce regional capacity by 250,000-300,000 b/d within the same period, ESAI Energy said in its recently published Global Outlook.
“The wave of new capacity makes 2015 a turning point for Europe’s refining sector,” said Christopher Barber, ESAI Energy’s manager of refining.
Wider diesel spreads this fall might temporarily give European refiners some breathing space, but new capacity abroad in 2015 will make Europe’s refineries even less profitable than during previous years, according to Barber (OGJ Online, Dec. 2, 2013).
By 2015, Europe will need to cut its refining capacity by more than 250,000 b/d simply to sustain minimal operating rates similar to those maintained over the past 4 years, Barber said.
The most substantial rise in distillation capacity will occur in Asia-Pacific, where rationalization in Japan and Australia over the last year led to capacity reductions that more than offset new regional capacity, according to ESAI Energy, who projects a 950,000-b/d net capacity for OECD Asia-Pacific during the coming year.
ESAI Energy said it also expects major refinery the completion of projects under way in Saudi Arabia and UAE within the next 12 months will add about 900,000 b/d of capacity in the Middle East, with additional capacity expansions also projected during the same timeframe for refineries in the Americas.
