Global Refining Center of Gravity is Shifting Eastward

Since the beginning of this year, global energy demand has recovered, but the operating rate of global refineries has not rebounded significantly, which has led to a continuous increase in the profit margins of oil refiners in many places around the world. However, in the face of stronger expectations of a global economic slowdown, the two major international benchmark oil prices have both fallen since August, and major refiners have had to cut gasoline and diesel production and switch to other more profitable products to maintain profitability. Against this background, the promotion of new refining projects is undoubtedly expected to be more high. The International Energy Agency (IEA) pointed out that Asia and the Gulf region will be the main source of new refining capacity, which will promote the global refining focus from the previous Gulf of Mexico. Regions, Northwest Europe and other places have accelerated their transfer to the east.

1 million barrels per day to be added this year

Last year, global net refining capacity fell for the first time in 30 years, and is expected to increase by 1 million barrels per day this year and another 1.6 million barrels per day in 2023, the IEA said. By the end of 2023, global refining capacity is expected to increase by nearly 3 million barrels per day. Today, the expansion of refining capacity in Asia and the Gulf region will play a key role, with at least nine new refining projects to be launched this year and next. This will greatly offset the loss of global refining capacity over the past two years due to the outbreak.

Oil prices.com reported that the new oil refining project will rapidly increase the output of gasoline, diesel and other refined products, thus promoting the balance between fuel supply and demand in the United States and Europe.

Data from the U.S. Energy Information Administration shows that between 2020 and 2021, 1 million barrels per day of U.S. refining capacity will disappear. As of the first half of this year, the U.S.’s available refining capacity fell to a nearly 10-year low, with daily output falling from 18.09 million barrels at the beginning of last year to 17.94 million barrels at the beginning of the year, the lowest level since 2014 in the United States.

Obviously, Asia and the Gulf region, which are accelerating the implementation of new refining projects, have become emerging global refining and chemical centers. Among them, the expansion of refining capacity in the Gulf region is mainly concentrated in Saudi Arabia, Iran and other countries. According to Reuters, Saudi Arabia's Jizan Refinery with a daily capacity of 400,000 barrels, which was put into operation at the end of last year, has officially started the export of petroleum products. Iran reached a cooperation agreement on the construction of two refineries with a total capacity of 600,000 barrels per day in early August. In addition, the AlZour refinery in Kuwait with a daily production capacity of 615,000 barrels has also been officially put into operation recently, which is the largest oil refinery currently in operation in the country. The Karbala refinery with a capacity of 140,000 barrels per day in Iraq will start production in September, and the Duqm refinery in Oman with a capacity of 230,000 barrels per day will officially start operations early next year as planned.

China leads Asia's refining capacity growth

Everbright Futures Research Institute pointed out that from the perspective of the global refining capacity structure, the proportion of refining capacity in China and the United States is much higher than that in other countries and regions, followed by Europe, the Middle East, and Russia. Since 2011, the operating rate of Chinese refineries has been increasing year by year, and has risen from 66.74% in 2011 to 85.11% last year. Although the global refining capacity has not returned to the pre-epidemic level last year, the operating rate of Chinese refineries However, it has always maintained a stable level of improvement.

In recent years, China's refining capacity has accelerated expansion. On the one hand, it is due to the commissioning of large-scale private refining and chemical projects. On the other hand, it is driven by the transformation of fuel-based refineries into chemical-based refineries. The hydrocracking, hydrorefining and other units were quickly rolled out, which in turn led to the growth of light oil component production.

Clearly, China is accelerating to lead Asia's refining capacity growth. In mid-May, the Lianyungang Shenghong refining and chemical integration project was successfully commissioned, marking the official commissioning of the largest single-process refining and chemical integration project in China. It will gradually produce refined oil after August as planned. This is a very large-scale refining and chemical integration project integrating oil refining, aromatics and ethylene chemical industry. For downstream high-end chemical new materials, the designed annual production capacity of oil refining is 16 million tons, the annual production capacity of paraxylene is 2.8 million tons, and the annual production capacity of ethylene is 1.1 million tons.

As of August 1, the total construction progress of PetroChina's Guangdong Petrochemical Refining and Chemical Integration Project in Jieyang Binhai New Area has reached 99.78%, and it is expected to be put into operation in the third quarter of this year. As PetroChina's southern refining and chemical base, the project follows the route of deep processing of heavy and inferior crude oil, which can realize "oil if oil is suitable, aromatic if aromatic, and ene if suitable for ene". The designed annual oil refining capacity is 20 million tons and the annual aromatic hydrocarbon The production capacity is 2.6 million tons and the annual production capacity of ethylene is 1.2 million tons.

Gulf countries accelerate refining capacity

Saudi Aramco is investing heavily in the downstream sector as a means to expand crude exports, while also pursuing opportunities overseas, particularly in integrated refining and chemicals, said Mohammed Al Qahtani, Aramco's senior vice president of downstream operations.

It is worth noting that Saudi Aramco reached two cooperation related to the refining and chemical industry in the first week of August. On August 1, Saudi Aramco announced the acquisition of the global product business of U.S. Victory Petrochemical Company for US$2.65 billion. The acquisition will complement Saudi Aramco's premium branded lubricant product line, optimize its global base oil production capacity, and expand Saudi Aramco's own R&D operations, as well as partnerships with OEMs.

On August 3, Saudi Aramco and Sinopec signed a package of memorandums on cooperation, laying a foundation for further consolidating and expanding the long-term strategic cooperation between the two parties. The two sides will deepen cooperation in Saudi Arabia's petroleum and petrochemical project investment, petroleum and refining engineering services, material supply, procurement and construction, equipment manufacturing, carbon capture and hydrogen production technology.

Gulf News Network pointed out that Saudi Arabia and Iran have made obvious moves to expand their downstream refining business in recent years. In the context of Russian crude oil and petroleum products being sanctioned by Western countries, European countries are turning their attention to the Gulf countries, which gives the Gulf region its refining capacity. Expansion laid the foundation.

Iran has raised $18 billion in public and private funding for the construction of two refineries through tenders, as it seeks to increase Iran’s refining capacity by 600,000 barrels per hour (bpd) from current levels by 2027, IRNA reported on August 3. day. The Iranian government stated that Iran’s refining capacity has dropped by 11% in the past nine years. The existing refining capacity is about 2.1 million barrels per day, and only 250,000 barrels per day can be used for export after meeting domestic demand. Refining capacity increased by nearly 29%.

“The Gulf region will be one of the main sources of incremental supply of petroleum products this year,” said George Dix, refining industry analyst at energy consultancy EnergyAspects. In the future, its position in the downstream field will also become more and more important.”