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ESAI Energy report warns of refinery closures after 2021

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Hydrocarbon Engineering,


A report from ESAI Energy has said that an excess of global refining capacity looms after 2021.

Global Refining Capacity Five Year Outlook projects a significant increase in new distillation capacity to 2023. After lagging demand growth in recent years, the coming capacity build cycle will significantly outpace demand. The resulting rise in spare capacity will reduce global utilisation rates and put pressure on margins, particularly beyond 2021.

The need to produce additional gasoil for the bunker market will insulate refinery margins and utilisation rates. However, high utilisation rates will lead to the oversupply of high sulfur fuel oil and some other products, which will weigh heavily on margins after 2021. Marginal refiners will have to make fuel oil upgrading investments to stay viable. The need to invest coupled with rising spare distillation capacity will lead to a much more bearish operating environment for refiners. These new conditions will trigger another round of consolidation and rationalisation.

“In conjunction with slower demand growth, new distillation capacity will lead to an increase in spare distillation capacity,” explained ESAI Energy Head of Global Refining, Chris Barber. “This spare capacity will put cause refining margins and utilisation rates to fall, triggering another round of rationalisation after 2021.”

Read the article online at: https://www.hydrocarbonengineering.com/refining/09082018/esai-energy-report-warns-of-refinery-closures-after-2021/

 

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