(EnergyAsia, September 22 2016, Thursday) – Asia’s import dependence on oil and gas products is set to rise further as the region’s refiners have largely failed to add or upgrade production capacity to take advantage of low feedstock cost over the last two years, said Bain & Company.
As a result, the consulting firm predicts that “significant challenges” will force out the industry’s laggards for failing to prepare for the challenges of increased global competition, the expanded flows of new crude grades, tightened regulations and higher environmental standards.
“While these global trends will affect the entire refining sector, some countries are better positioned than others to thrive over the next decade,” said Dale Hardcastle, leader of Bain’s Southeast Asia oil and gas practice.
Market, operating conditions and quality of asset portfolio will be key to the refiners’ ability to compete as spelt out in detail in the firm’s latest report, “Full Potential for Oil Refiners in a Challenging Environment”.
The report found that the region has largely failed to reduce oil and gas product imports as its refining capacity expansion have not kept pace with demand growth.
On a global scale, Bain’s analysts found that independent refiners in the Asia-Pacific region, Middle East national oil companies (NOCs), and the Commonwealth of Independent States are among the most competitive while African and Latin America state firms and independents in the European Union are lagging behind.
“As oil costs stabilize, refineries are in for tough times,” said Mr Hardcastle. “It’s important for refiners around the world to tackle competitiveness in a structured way, which is where a full potential agenda can create a strategic advantage.”
State-owned firms in China and other parts of Asia are expected to benefit from the region’s rising oil demand.
“Refiners in the Asia-Pacific are well positioned to withstand the shift in the flows of crude feedstock and refined products around the world, but we anticipate continued pressure amid ongoing changes in the sector,” said Mr Hardcastle.
“This means that even the most favoured players will have to work hard to maintain their full potential.”
The consulting firm recommends that refiners focus on competing in four strategic areas:
– Access to large and growing markets, especially in the Asia-Pacific region;
– Maintain high-level operating conditions including feedstock strategy, operational efficiency and capital expenditure project excellence;
– Managing portfolio strategy that balances scale, complexity and location
– Having a robust operating model and organizational framework that reduces costs and raises effectiveness. Refiners must know how to manage regulators and stakeholders and have a vision that captures the promise of digitalisation.