(EnergyAsia, September 5 2014, Friday) — The refining industry will launch a total of two million b/d of new distillation capacity in 2015 that will lead to the “inevitable” shutdown of uncompetitive plants in Europe, said US consultant ESAI Energy.
“Global refiners will add nearly two million b/d of distillation capacity in the coming 12 months,” it said, compared with less than 300,000 b/d of capacity growth over the past year.
The new capacity will further undermine the profitability of marginal refiners, especially in Europe, which will be under pressure to cut another 250,000 to 350,000 b/d of capacity over the next 12 months, said ESAI Energy’s recently published Global Refining Outlook.
Asia has experienced the most dramatic shift with plant shutdowns in Japan and Australia far exceeding capacity additions over the last 12 months.
However, with the refining industry China and India in expansion mode, ESAI expects the region to boost net capacity by 950,000 b/d over the next 12 months.
In the Middle East, ESAI said Saudi Arabia and the UAE will launch new plants to help the region add a total of 900,000 b/d of capacity. The US and Latin America will also add capacity, heaping further misery on Europe.
“The wave of new capacity makes 2015 a turning point for Europe’s refining sector,” said Christopher Barber, ESAI Energy’s Manager of Refining.
“This fall, wider diesel spreads temporarily give European refiners some breathing space. But in 2015, new capacity elsewhere will make European refiners even less profitable. The announced capacity cuts by Italy’s ENI are a start, but they will not be enough.
“Europe will need to cut more than 250,000 b/d by 2015 just to maintain minimal operating rates similar to the past four years.”