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Editorial comment

Tis the season to get out the crystal ball and make predictions for 2015. And as I am sure you are no doubt aware, for our industry everyone has been at it, from associations to consultancies to oil and gas companies. So, I’m going to highlight a few that I believe are the ones we may want to keep in mind as the year unfolds.PwC has released the top five predictions its economists have made for this year, two of which I would like to draw attention to. The experts have said that US economic growth is expected to be the fastest for a decade. The cause of this is going to be a combination of a drop in unemployment and lower oil prices, which are going to contribute to rising consumption by US households. I’d also like to highlight that PwC ‘expect the BRIC’s contribution to global growth to fall for the second year in a row to around 33%.’ This will also be due to a combination of factors, namely a slowdown in economic growth in China, Russian GDP contracting due to low oil prices and economic sanctions, and slow growth in Brazil. So it seems that there are very different predictions being made for some very large economies and it also seems that low oil prices are going to have very different impacts the world over. In the 24th Annual General Meeting of Essar Oil Limited, the company’s Chairman, Shashi Ruia made some predictions for 2015 and beyond. Firstly he commented that the ‘global refining industry continues to face several challenges in terms of weak demand, new capacity addition and dominating role of government in both exporting and importing countries,’ and I, for one, cannot argue with any of that as the current scenario being faced by the refining industry is very transparent and is not expected to change any time soon. Ruia looked more closely at India’s refining industry in his speech and said that capacity, which currently stands at 217 million tpy in the country, is fairly balanced when compared to current demand, especially when making adjustments for fuel and loss as well as higher capacity utilisation and the Special Economic Zone refinery. He also highlighted that a growth rate of 4 – 5% that is expected within the sector is going to mean that surplus capacity will be absorbed within the next 3 – 5 years. Ruia did however point out that greenfield expansion in the Indian refining industry is going to be difficult due to challenges with land acquisition, so future expansions are most likely going to be brownfield project oriented.Finally I’d like to highlight one comment from Paul Chowdhry, Head of Research at Wood Mackenzie who asserted in the company’s Horizons: What to look for in 2015, ‘oil market concerns will be inescapable in 2015.’ From the points mentioned above, and many more I do not have the space to discuss here, this is undoubtedly true. Our sector has had a lot to contend with over the years, and as we enter 2015, with geopolitical tensions, oil pricing and economic sanctions as they are, we have many more hurdles to jump over in the coming months and beyond.


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