Released April 08, 2024 | SUGAR LAND
en
Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--In recent years, the downstream petroleum refining industry has been replacing older refineries that are both unprofitable and unfriendly to environment, social and governance (ESG) concerns. To replace these, the industry is building new ones in areas where demand is increasing, mostly in Asia and Africa. OPEC and the International Energy Agency (IEA) expect world demand to rise through 2030, which will require more refining capacity.
"Basically," said Industrial Info's senior director, Energy Market Intelligence, Hillary Stevenson, "there's always a process of closing old refineries and adding new capacity, and right now that trend is on a net increase."
In a recent report, Wood Mackenzie, said, "Refining margins will start to weaken by the end of the decade as fossil fuel demand declines. In OECD (Organization for Economic Cooperation and Development) countries, transport fuel demand will start to fall from 2025, while the unwinding of free allowances for carbon emissions will also impact European net cash margins from 2030 onwards."
Here's how those trends are playing out, according Industrial Info.
Going Up: New Refining Capacity Coming Online
Following a rash of refinery closures during the pandemic, 2023 had the largest amount of refining capacity expansion since 2015. Industrial Info's research shows 1,828,500 barrels per day (BBL/d) of refining capacity came online in 2023 by way of new units, while 127,000 BBL/d of capacity was added to existing units globally. Subscribers to Industrial Info's Global Market Intelligence (GMI) Petroleum Refining Unit Database can click here for the profiles of the new units that came online in 2023 and click here for the profiles of the existing units that increased in capacity in 2023.
So far this year, 780,000 BBL/d of new capacity has already come online (including Dangote Industries Limited's 650,000-barrel-per-day (BBL/d) Lekki, Nigeria refinery) with another 880,450 BBL/d expected (including Pemex's (Mexico City) 340,000-BBL/d Dos Bocas refinery in Mexico and Shandong Yulong Petrochemical Company Limited's 400,000-BBL/d Nanshan Yulong Refinery in Shandong Yantai, China). For more information, see April 4, 2024, article - Dangote's Lekki Refinery Finally Operational and March 13, 2024, article - Three Largest Refineries Set for Startup in 2024 Face Delays. Click here for a list of the related unit profiles.
Looking forward on a global basis, Industrial Info is tracking another 18.36 million BBL/d of new refining capacity and 840,000 BBL/d of capacity expansion at existing units slated to come online by 2030. Subscribers can click here for a list of related unit profiles. Of that, 3.128 million BBL/d is under construction, 14.266 million BBL/d is still in planning, and 947,000 BBL/d is in the engineering stage. It's worth noting that projects in the planning stages can be subject to delays or cancellations, so a number of these may not reach the finish line by 2030. Most of the new capacity is being planned in Asia and Africa.
Going Down: Refineries Closing
However, older, less profitable plants are always at risk of closure. Industrial Info's research shows 10.88 million BBL/d of refining capacity closed between 2015 and 2023 (click here for the related unit profiles), mostly in Asia, Europe, and North America, with another 2 million BBL/d of refining capacity set to close by the end of the decade (click here for the related unit profiles).
In addition to these numbers Wood Mac sees about another 20 million BBL/d of capacity, involving about 120 facilities, at risk of closing by 2030.
The report found Europe to be the region in which most refineries were at risk, while Africa and the Americas--north and south--were home to the fewest likely closures. South America and Africa had none deemed at risk.
In the U.S., Industrial Info notes that Phillips 66's (NYSE:PSX) (Houston, Texas) Rodeo refinery in California closed recently and is producing renewable diesel. For more information, see April 3, 2024, article - Phillips 66 Overhauls Rodeo Refinery for Renewable Diesel.
Also in California, Phillips 66's Santa Maria refinery in San Luis Obispo County shut down in January 2023. LyondellBasell's (NYSE:LYB) (Rotterdam, Netherlands) refinery in Houston, Texas, is set to close in 2025, but "that time frame could be extended if margins continue to be good--or it could close sooner if major unplanned issues arise" Stevenson noted.
Wood Mac's report sees five top factors influencing closing decisions:
Wood Mac adds, "New investments have largely shifted away from capacity expansion and upgrading additions, towards decarbonization. Biofuels are still a small portion of OECD supply in North America. This segment is expected to grow significantly over the decade as refiners adapt to the energy transition." Industrial Info is tracking 300,000 BBL/d of operational global renewable diesel capacity, mostly in North America, with another 1 million BBL/d planned.
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).
"Basically," said Industrial Info's senior director, Energy Market Intelligence, Hillary Stevenson, "there's always a process of closing old refineries and adding new capacity, and right now that trend is on a net increase."
In a recent report, Wood Mackenzie, said, "Refining margins will start to weaken by the end of the decade as fossil fuel demand declines. In OECD (Organization for Economic Cooperation and Development) countries, transport fuel demand will start to fall from 2025, while the unwinding of free allowances for carbon emissions will also impact European net cash margins from 2030 onwards."
Here's how those trends are playing out, according Industrial Info.
Going Up: New Refining Capacity Coming Online
Following a rash of refinery closures during the pandemic, 2023 had the largest amount of refining capacity expansion since 2015. Industrial Info's research shows 1,828,500 barrels per day (BBL/d) of refining capacity came online in 2023 by way of new units, while 127,000 BBL/d of capacity was added to existing units globally. Subscribers to Industrial Info's Global Market Intelligence (GMI) Petroleum Refining Unit Database can click here for the profiles of the new units that came online in 2023 and click here for the profiles of the existing units that increased in capacity in 2023.
So far this year, 780,000 BBL/d of new capacity has already come online (including Dangote Industries Limited's 650,000-barrel-per-day (BBL/d) Lekki, Nigeria refinery) with another 880,450 BBL/d expected (including Pemex's (Mexico City) 340,000-BBL/d Dos Bocas refinery in Mexico and Shandong Yulong Petrochemical Company Limited's 400,000-BBL/d Nanshan Yulong Refinery in Shandong Yantai, China). For more information, see April 4, 2024, article - Dangote's Lekki Refinery Finally Operational and March 13, 2024, article - Three Largest Refineries Set for Startup in 2024 Face Delays. Click here for a list of the related unit profiles.
Looking forward on a global basis, Industrial Info is tracking another 18.36 million BBL/d of new refining capacity and 840,000 BBL/d of capacity expansion at existing units slated to come online by 2030. Subscribers can click here for a list of related unit profiles. Of that, 3.128 million BBL/d is under construction, 14.266 million BBL/d is still in planning, and 947,000 BBL/d is in the engineering stage. It's worth noting that projects in the planning stages can be subject to delays or cancellations, so a number of these may not reach the finish line by 2030. Most of the new capacity is being planned in Asia and Africa.
Going Down: Refineries Closing
However, older, less profitable plants are always at risk of closure. Industrial Info's research shows 10.88 million BBL/d of refining capacity closed between 2015 and 2023 (click here for the related unit profiles), mostly in Asia, Europe, and North America, with another 2 million BBL/d of refining capacity set to close by the end of the decade (click here for the related unit profiles).
In addition to these numbers Wood Mac sees about another 20 million BBL/d of capacity, involving about 120 facilities, at risk of closing by 2030.
The report found Europe to be the region in which most refineries were at risk, while Africa and the Americas--north and south--were home to the fewest likely closures. South America and Africa had none deemed at risk.
In the U.S., Industrial Info notes that Phillips 66's (NYSE:PSX) (Houston, Texas) Rodeo refinery in California closed recently and is producing renewable diesel. For more information, see April 3, 2024, article - Phillips 66 Overhauls Rodeo Refinery for Renewable Diesel.
Also in California, Phillips 66's Santa Maria refinery in San Luis Obispo County shut down in January 2023. LyondellBasell's (NYSE:LYB) (Rotterdam, Netherlands) refinery in Houston, Texas, is set to close in 2025, but "that time frame could be extended if margins continue to be good--or it could close sooner if major unplanned issues arise" Stevenson noted.
Wood Mac's report sees five top factors influencing closing decisions:
- Profitability
- Emissions costs. These are on the rise as carbon taxes begin to take effect worldwide over the next six years. Carbon taxes pose a greater risk in Europe than anywhere else in the world.
- Ownership. This factor is divided among national oil companies (NOCs), integrated oil companies (IOCs) and joint ventures (JVs). The report explained, "Our ownership ranking reflects the importance of an asset's non-commercial factors, such as social value, on its continued operation." IOCs tend to be at higher risk, they found.
- Strategic value. This, Wood Mac found, was significant mainly to NOCs, in cases where the government felt domestic refineries were keys to a country's energy security.
- Environmental Investment. Here the ESG-related pressure brought by investors was considered, along with the increase in government regulations and environmental taxes. "Given that their products are inherently emissions intensive, refiners will need to pursue broad-based strategies to limit exposure to transition risk."
Wood Mac adds, "New investments have largely shifted away from capacity expansion and upgrading additions, towards decarbonization. Biofuels are still a small portion of OECD supply in North America. This segment is expected to grow significantly over the decade as refiners adapt to the energy transition." Industrial Info is tracking 300,000 BBL/d of operational global renewable diesel capacity, mostly in North America, with another 1 million BBL/d planned.
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).
