February 07, 2006 03:46 PM ET Oil refiners see growth in demand, capacity ahead
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HOUSTON (Reuters) - Oil refiners expect growth in demand, production, and probably profits in the years ahead, though they don't know how long the good times will last, industry executives said at an energy conference on Tuesday.
Global economic growth is expected to bring global crude oil demand, currently at 84 million barrels per day (bpd), to 107 million barrels per day by 2020, said Atul Laul, vice president of Indian refiner Reliance Industries Ltd. .
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The company's 660,000 barrel per day (bpd) refinery in Jamnagar, India, is preparing to double its crude oil processing capacity by the second quarter of 2008, Laul said at a panel discussion on worldwide refining trends at the CERAWeek energy conference in Houston.
"Demand is a key determinant in ushering in a new age in refining," Laul said.
WORLDWIDE GROWTH
The Jamnagar expansion is part of the 5.3 million bpd growth in world refining capacity expected by the end of 2010, said Lynn Elsenhans, executive vice president of global manufacturing for Royal Dutch Shell Plc .
Refining capacity in India and China is expected to grow by 1.5 million bpd while Middle Eastern refining capacity is expected to expand by at least that amount during the remainder of the decade, Elsenhans said.
In the Western Hemisphere, refining capacity is expected to grow by 1.8 million barrels and in Europe and Africa by 500,000 bpd.
"In the longer run, we expect capacity will be aligned with demand as companies make selective investments and seek to maximize utilization," Elsenhans said. "However, there is a clear risk that capacity additions will overshoot demand in some markets."
Refining margins have increased as demand and supply have been tightly balanced, as reflected in refinery utilization rates, Laul said.
"With the rise in refinery utilization rates there has been a increase in refining margins," he said.
Refinery utilization is hovering near 90 percent of capacity.
NEW REFINERIES
New refineries aren't expected in the United States, where refiners will expand existing plants. In Asia and the Middle East, new refineries will likely be built.
U.S. refiners will focus on increasing the capacity of their refineries to process cheaper high-sulfur crude oil for the production of low-sulfur motor fuels.
ConocoPhillips plans to add 280,000 bpd across its refining system, said J.W. Nokes, executive vice president for refining, marketing, supply and transportation.
"These are equivalent to building a deep conversion refinery, but building at several of our refineries," Nokes said.
To keep up with demand refiners will need to invest $200 billion over the next 10 years, he said.
Crude oil supply is not expected to be a problem for the next four years, but "we'll need to address securing supply late in this decade or early in the next," Nokes said.
Communications and automation technology could change how refineries operate in the next five years, said Rony Jammar, senior vice president and head of downstream for research and engineering company SAIC.
"I believe we'll see refineries put all their (operation) centers in one city and operate all their (gasoline-producing) cat crackers from there," Jammar said.
Currently, refiners operate their plants from on-site operations centers.
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Related information
http://news.moneycentral.msn.com/inc/news/printredir.asp?Feed=OBR&Date=20060207&ID=5484927
Stocks mentioned in this articleConocoPhillips(COP) Stock Quote, Chart, News
All Reuters News
HOUSTON (Reuters) - Oil refiners expect growth in demand, production, and probably profits in the years ahead, though they don't know how long the good times will last, industry executives said at an energy conference on Tuesday.
Global economic growth is expected to bring global crude oil demand, currently at 84 million barrels per day (bpd), to 107 million barrels per day by 2020, said Atul Laul, vice president of Indian refiner Reliance Industries Ltd. .
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The company's 660,000 barrel per day (bpd) refinery in Jamnagar, India, is preparing to double its crude oil processing capacity by the second quarter of 2008, Laul said at a panel discussion on worldwide refining trends at the CERAWeek energy conference in Houston.
"Demand is a key determinant in ushering in a new age in refining," Laul said.
WORLDWIDE GROWTH
The Jamnagar expansion is part of the 5.3 million bpd growth in world refining capacity expected by the end of 2010, said Lynn Elsenhans, executive vice president of global manufacturing for Royal Dutch Shell Plc .
Refining capacity in India and China is expected to grow by 1.5 million bpd while Middle Eastern refining capacity is expected to expand by at least that amount during the remainder of the decade, Elsenhans said.
In the Western Hemisphere, refining capacity is expected to grow by 1.8 million barrels and in Europe and Africa by 500,000 bpd.
"In the longer run, we expect capacity will be aligned with demand as companies make selective investments and seek to maximize utilization," Elsenhans said. "However, there is a clear risk that capacity additions will overshoot demand in some markets."
Refining margins have increased as demand and supply have been tightly balanced, as reflected in refinery utilization rates, Laul said.
"With the rise in refinery utilization rates there has been a increase in refining margins," he said.
Refinery utilization is hovering near 90 percent of capacity.
NEW REFINERIES
New refineries aren't expected in the United States, where refiners will expand existing plants. In Asia and the Middle East, new refineries will likely be built.
U.S. refiners will focus on increasing the capacity of their refineries to process cheaper high-sulfur crude oil for the production of low-sulfur motor fuels.
ConocoPhillips plans to add 280,000 bpd across its refining system, said J.W. Nokes, executive vice president for refining, marketing, supply and transportation.
"These are equivalent to building a deep conversion refinery, but building at several of our refineries," Nokes said.
To keep up with demand refiners will need to invest $200 billion over the next 10 years, he said.
Crude oil supply is not expected to be a problem for the next four years, but "we'll need to address securing supply late in this decade or early in the next," Nokes said.
Communications and automation technology could change how refineries operate in the next five years, said Rony Jammar, senior vice president and head of downstream for research and engineering company SAIC.
"I believe we'll see refineries put all their (operation) centers in one city and operate all their (gasoline-producing) cat crackers from there," Jammar said.
Currently, refiners operate their plants from on-site operations centers.
Copyright 2006 Reuters Back to Recent News
