IEA: new refineries will increase global refining capacity in 2022 and 2023

Global demand for refined products dropped substantially in 2020 as a result of the COVID-19 pandemic. Less petroleum demand and the associated lower petroleum product prices encouraged refinery closures, reducing global refining capacity, particularly in the US, Europe and Japan. However, several new refinery projects are set to come online during 2022 and 2023, increasing capacity.

As global demand for petroleum products returned closer to pre-pandemic levels through 2021 and early 2022, the loss of refinery capacity contributed to higher crack spreads — the difference between the price of a barrel of crude oil and the wholesale price of petroleum products — which serve as one indicator of the profitability of refining. After Russia began its full-scale invasion of Ukraine in late February 2022, the impacts of reduced global refining capacity were exacerbated. Associated sanctions on Russia — with well over 5 million bpd in crude oil processing capacity — disrupted exports of Russia’s refined products into the global market, and will likely continue to do so as import bans in the EU and UK come into full force. Constraints on global refinery capacity have been contributing to higher crack spreads in 1H22, and they are likely to continue contributing to high crack spreads through at least the end of 2022.

In its June 2022 Oil Market Report, the IEA expects net global refining capacity to expand by 1.0 million bpd in 2022 and by an additional 1.6 million bpd in 2023. New refining capacity growth includes several high-profile, high-capacity refinery projects that are underway, particularly in China and the Middle East, which could add more than 4.0 million bpd of new capacity over the next two years. High-capacity refineries require access to reliable sources of crude oil inputs to maintain higher utilisation and to a sufficiently large pool of potential customers to supply. Many of these new refineries are located in coastal areas and have easy access to export refined products that are not consumed domestically.

Read the article online at: https://www.hydrocarbonengineering.com/refining/21072022/iea-new-refineries-will-increase-global-refining-capacity-in-2022-and-2023/