Chronically weak financial performance in the refining sector is accelerating the shift in ownership away from Independent Oil Companies towards National Oil Companies as never before. For years, IOCs have been under pressure from their shareholders to improve returns in the downstream and the weak economic environment has exacerbated the pressures in recent years. Many NOCs, in contrast, have the flexibility to take a longer term, more strategic approach and are in fact doing so.
NOCs Dominate New Builds
Worldwide, Evaluate Energy has identified 7.5 million b/d of new refinery plant under construction worldwide, a further 3 million b/d at the design/engineering stage and an additional 4.7 million b/d that are still in the planning stage. Almost 50% of the newly planned refineries are the brainchilds of just 10 companies – all National oil companies or NOCs. (see Figure 1).
Unsurprisingly, Chinese companies Sinopec and PetroChina dominate the new projects, with plans for 1.5 and 1.3 million b/d of new capacity respectively, boosting their capacity by 40% over the next 5 years. Less than half of these plants are currently under construction, raising doubts as to whether Chinese capacity increases will keep pace with internal growth for refined product. IEA demand forecasts show China’s product demand growing by 700,000 b/d this year and 400,000 b/d in 2011, suggesting that the new products may only just keep pace with demand and lead to pressure to increase product flows to China from refineries in the region and beyond.
CNPC has a further 3 new projects on the go in Chad (the 50,000 b/d N’Djamena refinery which is under construction), Niger (the 20,000 b/d planned Zinder refinery) and Costa Rica (the 35,000 b/d Limon refinery, still in the planning stage).
Saudi Aramco meanwhile has plans to increase its capacity by almost 60% or 1.4 million b/d with projects at Yanbu, Ras Tanura, Jazan, a JV with Total S.A (NYSE:TOT) at Jubail and an expansion at the Motiva refinery at Port Arthur. PdVSA has plans for refineries at Cabruta, Caripito, Zulia and Santa Ines, though all of these except the Santa Ines are still at the planning stage. The Venezuelan state company also has a 40% interest in a JV with PetroChina to construct a 400,000 b/d plant at Jieyang in China.
…
