Released November 04, 2024 | SUGAR LAND
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Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--Turmoil in demand cycles due to COVID; updates in funding for new environmental, social and governance (ESG)/carbon capture and storage (CCS) projects and for switchovers; and uncertainty about election outcomes. Those and other issues have delayed a significant number of refinery projects over the last five years, said Industrial Info's Hillary Stevenson, senior director, Energy Market Intelligence, at October's "2025 Market Outlook" in Baton Rouge, Louisiana.
Here are some of the issues. North American refinery project spending collapsed, along with the rest of the oil markets, in 2020 due to the pandemic. From $8.1 billion in capital expenditures and $1.7 billion for maintenance in 2019, it dropped to $1.4 billion in capital expenditures and $1.4 billion in maintenance for 2020. It began to pick up in 2021 and 2022, then dropped again in 2023 and 2024. Few projects were completely dropped, but almost all were pushed back, Stevenson said. This could lead to 2025 smashing the 2019 spend, ramping up to $10.5 billion in capital expenditures and $3.3 billion in maintenance.
Drivers Up, Drivers Down
The biggest down-driver is the fact that there are fewer drivers--on the road. Gasoline demand is one thing that has never fully recovered since the pandemic. Only in the latter months of 2024 has demand begun to reach 2019 levels, and even that is misleading.
"It's actually related to all of those hurricane evacuations," Stevenson noted. "The most recent numbers are actually down."
Low demand means lower gasoline prices--and lower refining margins, even as crude oil prices also drop. The future could be tough.
"If our domestic gasoline demand market is slowing down, that doesn't really bode well for U.S. refiners," she said.
Oher constraints include regulations pushing electric vehicles (EVs) and ESG agendas as a whole, along with investor pressure to move away from fossil fuels.
But some of that pressure is also driving construction to retrofit for low sulfur fuels, including low sulfur road fuels, diesel and marine fuels. All of those require refinery updates.
Export markets for refined products are also ramping up.
International Demand Drops
As Europe adopts more EVs, its fuel demand has decreased. And as huge player on the international energy market, "China is the wild card. In the chart, you can see a 2 million barrel-per-day increase over the four-year range," Stevenson said.
But that's not a guarantee, and if those levels are not reached, the impact could be significant. "That number could be lower because the EV adoption rate in China has been higher than anywhere else--and they have also had a pretty good adoption rate of LPG (liquefied petroleum gas) and LNG (liquefied natural gas)-powered trucks. So that demand expectation could underperform, then we would have even lower global demand," which would create another challenge for refiners, she pointed out.
Should Chinese increases not materialize, the only areas with rising demand would be Africa on the Atlantic Basin and India in the Pacific Basin. "Larger populations and larger concentrations of wealth will fuel demand," she said.
Tracking Changes in Planned Outages
Outages based on planned maintenance also affect supply markets--and those schedules can change. To visualize the fluctuating schedules, Stevenson is excited about a new IIR tool.
"One of the best tools that the development team has made recently, the Refinery Capacity Insights tool, has this time travel feature. So I hopped in The Time Machine to find out what happened. Why did spending go down in 2024 and move into 2025? So I asked The Time Machine to give me a chart for what the Offline Event database looked like a year ago, six months ago and then today."
What the charts revealed is that a year ago, the fall 2024 was supposed to be more than 1.4 million barrels per day (BBL/d). That has decreased. She pointed out that "Now the planned CDU (crude distillation unit) outages for fall 2024 (dark line on the graph) is less than 1 million barrels a day, and we see a huge increase from six months ago, and a year ago in fall 2025.
While a lot of the spend was slated for this fall, Stevenson said, "this actually probably going to happen in fall 2025."
Click on the image at right for a presentation slide showing the decrease in planned fall 2024 outage capacity.
From the Field
Participant Stacy Jones of Chromalox, a provider of industrial heating solutions, was glad to be back after having missed the presentation in recent years. "They did a great job of laying out the percentages" of plant projects expected for next year, she said. "Those percentages will help me be successful in 2025."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
Here are some of the issues. North American refinery project spending collapsed, along with the rest of the oil markets, in 2020 due to the pandemic. From $8.1 billion in capital expenditures and $1.7 billion for maintenance in 2019, it dropped to $1.4 billion in capital expenditures and $1.4 billion in maintenance for 2020. It began to pick up in 2021 and 2022, then dropped again in 2023 and 2024. Few projects were completely dropped, but almost all were pushed back, Stevenson said. This could lead to 2025 smashing the 2019 spend, ramping up to $10.5 billion in capital expenditures and $3.3 billion in maintenance.
Drivers Up, Drivers Down
The biggest down-driver is the fact that there are fewer drivers--on the road. Gasoline demand is one thing that has never fully recovered since the pandemic. Only in the latter months of 2024 has demand begun to reach 2019 levels, and even that is misleading.
"It's actually related to all of those hurricane evacuations," Stevenson noted. "The most recent numbers are actually down."
Low demand means lower gasoline prices--and lower refining margins, even as crude oil prices also drop. The future could be tough.
"If our domestic gasoline demand market is slowing down, that doesn't really bode well for U.S. refiners," she said.
Oher constraints include regulations pushing electric vehicles (EVs) and ESG agendas as a whole, along with investor pressure to move away from fossil fuels.
But some of that pressure is also driving construction to retrofit for low sulfur fuels, including low sulfur road fuels, diesel and marine fuels. All of those require refinery updates.
Export markets for refined products are also ramping up.
International Demand Drops
As Europe adopts more EVs, its fuel demand has decreased. And as huge player on the international energy market, "China is the wild card. In the chart, you can see a 2 million barrel-per-day increase over the four-year range," Stevenson said.
But that's not a guarantee, and if those levels are not reached, the impact could be significant. "That number could be lower because the EV adoption rate in China has been higher than anywhere else--and they have also had a pretty good adoption rate of LPG (liquefied petroleum gas) and LNG (liquefied natural gas)-powered trucks. So that demand expectation could underperform, then we would have even lower global demand," which would create another challenge for refiners, she pointed out.
Should Chinese increases not materialize, the only areas with rising demand would be Africa on the Atlantic Basin and India in the Pacific Basin. "Larger populations and larger concentrations of wealth will fuel demand," she said.
Tracking Changes in Planned Outages
Outages based on planned maintenance also affect supply markets--and those schedules can change. To visualize the fluctuating schedules, Stevenson is excited about a new IIR tool.
"One of the best tools that the development team has made recently, the Refinery Capacity Insights tool, has this time travel feature. So I hopped in The Time Machine to find out what happened. Why did spending go down in 2024 and move into 2025? So I asked The Time Machine to give me a chart for what the Offline Event database looked like a year ago, six months ago and then today."
What the charts revealed is that a year ago, the fall 2024 was supposed to be more than 1.4 million barrels per day (BBL/d). That has decreased. She pointed out that "Now the planned CDU (crude distillation unit) outages for fall 2024 (dark line on the graph) is less than 1 million barrels a day, and we see a huge increase from six months ago, and a year ago in fall 2025.
While a lot of the spend was slated for this fall, Stevenson said, "this actually probably going to happen in fall 2025."
From the Field
Participant Stacy Jones of Chromalox, a provider of industrial heating solutions, was glad to be back after having missed the presentation in recent years. "They did a great job of laying out the percentages" of plant projects expected for next year, she said. "Those percentages will help me be successful in 2025."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
