- Capacity to come online in Middle East and Asia will bring new wave of competition for European refiners
Davide Ghilotti, Upstream
Energiesnet.com 09 20 2023
Global demand for refined petroleum products including fuels and chemicals is expected to increase this year and stay elevated on bullish fundamentals, delegates at the 24th World Petroleum Congress in Calgary heard on Monday.
As the global economies bounced back from the Covid-19 pandemic of the early 2020s, demand for refinery-based products started growing again. Almost all subsegments of petrochemicals and fuels, aside from jet fuel, are showing a strong performance this year, speakers said during a panel discussion at the conference.
According to Mohamed A Al-Brahim, assistant to the minister of energy of Saudi Arabia, demand for refined products globally will be higher in 2023 than it was in 2020, before the pandemic.
Growth in the sector is expected to continue in the medium term, with demand for petroleum-based chemicals, in particular, forecast to increase by up to 60% in the coming decade and beyond, he said.
To meet the growth in demand, Al-Brahim said that some 5 million barrels per day of new refining capacity is slated to be installed globally, the majority of which will be located in the Middle East, China and India.
“This capacity will be required in the future,” he said, speaking of an “increasing integration between refineries and chemicals [businesses]” on the part of operators.
At the same time, the new capacity to come online in the Middle East and Asia will represent a headwind for Europe-based refineries, according to Juan Abascal, executive director of Industrial Transformation and Circular Economy at Spain’s Repsol.
“Our ability to reduce the breakeven is crucial to ensure we can continue to produce at the European refineries,” said Abascal.
Speaking to Upstream on the sidelines of the event, Abascal noted that European facilities have to optimise their processes to drive down fixed costs, in order to “stand a chance” against new competition from Asia.
He pointed, as an example, to lower costs of oil sourcing in the Middle East and lower labour costs in India as elements that could make output from those plants “very competitive against us in Europe”.
“In a 10- to 15-year perspective, European companies have to look at that [source of competition] and do all that’s possible to optimise and slice their costs progressively, to remain competitive,” Abascal said.
A second Repsol source added: “To stay in business, you have to be the last man standing.”
upstreamonline.com 09 19 2023