Global oil refining capacity set to increase

Singapore: Global oil refining capacity will increase at an average 1.5 million barrels a year through 2015, led by expansion in China, the International Energy Agency (IEA) said.

Refiners will boost capacity by 10 per cent globally from 2009 to 2015 even as older plants in developed nations are shut to support profits, the Paris-based agency said.

China, the world's second-largest energy consumer, will build 3.3 million barrels a day of refining capacity out of a global increase of 9 million, the IEA said yesterday in its Medium-Term Oil and Gas Markets 2010 report. Average utilisation rates will decline to 78 per cent of capacity in 2015, from 81 per cent in 2009, it said.

Refiners in developed countries including Royal Dutch Shell Plc are shutting facilities or converting plants to terminals because of declining profit margins. Older refineries also lack upgrading capabilities to make cleaner fuels, the IEA said.

Even as new refineries are proposed in China, India, Saudi Arabia and Brazil, "capacity rationalisation" in the Organisation for Economic Cooperation and Development (OECD) countries will remove 1.4 million barrels a day between 2009 and 2011, leaving an expected 93.1 million barrels a day next year, the IEA said.

China, which consumes more oil than any country except the US, poses the "largest risk" to capacity forecasts because of limited information on the status of proposed projects, according to the IEA.

"We assume that Chinese expansions will be motivated by securing product supplies to meet domestic demand growth for distillate products, thereby limiting product imports," it said.

Refiners in the 31-country OECD, where processing rates were reduced by about nine percentage points in June last year to 78 per cent of capacity, will likely close the most plants, the IEA said.