Energy Market Consultants have commented that the global refining industry needs to reduce its capacity over the next five years in order to once again establish and maintain economically feasible utilisation rates. EMC has specified that an ideal target is 83 – 84%, which is daunting as the average utilisation rate fell as low as 77% last year. EMC said, ‘according to our analysis, around 7 million bpd of primary distillation capacity worldwide will have to close in order to achieve this required utilisation level.’
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Over the past six months several notable refinery shutdowns have been announced and indeed actioned. In November, Valero Energy Corp. said it will close the Delaware City, Delaware plant shortly after it had already started shutting down its facility in Aruba. The Delaware refinery, Valero’s oldest, is ranked 21st in the US and has a processing capacity of 240 000 bpd and the Aruba refinery had the capacity to process 235 000 bpd. In October 2009, Sunoco idled its Eagle Point, New Jersey plant, which could process 150 000 bpd, due to over capacity and moved all work to its Philadelphia and Marcus Hook refineries. In early January, Shell Canada announced that it will be converting the 130 000 bpd Montreal East refinery in to a storage facility for gasoline, diesel and aviation fuels over the next year. However the most recent news has come from Chevron Corp. Following on from an announcement on the 18th January that the company will be cutting an undisclosed number of jobs from its worldwide refining, marketing and retail operations, speculation as to the closure of its Richmond plant started. Chevron’s oldest refinery has a processing capacity of 240 000 bpd and was scheduled for a US$ 1 billion retrofit until work was halted due to an incomplete environmental impact report. These closures total 995 000 bpd and that clearly isn’t enough. So one questions remains, where are the 7 million bpd going to be cut from? Mature markets such as North America and Europe are where attention is focused at the moment. This comes as no surprise as four of the refineries mentioned above are in North America and the European market saw its sharpest year on year fall in processing capacity utilisation in the fourth quarter of 2009. Also, the rising prominence and stability of the BRIC grouping is contributing to the US and Europe’s fall from dominance. Brazil, Russia, India and China are cementing their statuses as increasingly important and powerful emerging markets that are exiting recession quickly. The Financial Times has suggested that ‘collectively, the Bric economies could well surpass output in the Group of Seven wealthy nations by 2032,’ and ‘ the Brics already have a bigger share of world trade than the US.’ This gap can only increase if the 7 million bpd that needs to be plucked out of the processing industry comes predominantly from the US and Europe. Reaching optimum processing capacities across the board is obviously beneficial to the global economy as it starts out on the road to recovery. However, it appears that for the North American and European refining sectors, recovery will involve two steps back in order to make the much needed step forward into financial stability once again. In this issue of Hydrocarbon Engineering, Gordon Cope’s article ‘Get ready for gas!’ looks at the North American natural gas industry and how it can help the US decrease its dependence on oil.