Stormy Weather Exposes Shortcomings Of World's Oil Refineries
BRUSSELS/LONDON, Sept 21 (Reuters) - Hurricane Harvey's crippling impact on U.S. oil refinery operations this month and the challenge buyers faced in filling the gap in gasoline supplies has exposed a shortage of spare refining capacity around the globe.
Nearly a quarter of U.S. refining capacity was knocked out by the storm this month, driving U.S. gasoline prices to two-year highs above $2 a gallon. Many plants are still struggling to resume normal operations, prompting other refineries around the world to crank up output to fill the gap.
Global refining is considered to be running at its maximum when capacity utilisation is 85.5 percent, the highest level reached in the modern era, BP's head of refining economics Richard de Caux said.
Today the utilisation level is 83 percent, he told the Platts Refining Summit in Brussels, suggesting a very slim buffer.
"The spare capacity is not really there," said Dario Scaffardi, general manager of Italian refiner Saras. "In as much as consumption worldwide is growing, refinery capacity is not long at all."
Spare capacity is needed to meet demand when refineries undergo maintenance or face unexpected outages. Too much in reserve is costly for refiners. But Hurricane Harvey has shown the world may not have enough.
Consultant JBC Energy said refiners could process 83 million bpd of crude by the end of 2017. In 2016, BP data showed processing at roughly 80.6 million bpd.
Energy consultancy FGE estimates spare global refining capacity, based on official or nameplate numbers, stands at 14 million bpd, down from 18 million bpd earlier this decade.
But nameplate figures can be misleading, as they are based on capacity of a refinery when built or refurbished. Many cannot match those levels due to years of underinvestment. So actual spare capacity may only be a fraction of that 14 million bpd.
For example, Venezuela's four refineries have run at record lows this year as they lack spare parts. Plants in Mexico, Brazil and Nigeria have also suffered poor investment for years.
At the same time, demand for oil and its products is climbing, led by China and India, and more developed economies.
'Silver Age'
"What we have is good demand growth and, ... whilst there are long lists of refinery projects, not many of them are coming through," said Steve Sawyer, FGE's head of refining.
Throw Hurricane Harvey into the mix and the shortage in spare capacity becomes increasingly apparent.
"Are we going to assume Venezuelan refinery utilisation rates will suddenly jump?" Energy Aspects said. "Or are we going to rely on Nigeria's dilapidated refineries to fill the gap? None of this capacity is available to the current market."
12
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds
- How Likely Is an All-Out War in the Middle East Involving the USA?
- Rooftop Solar Now 4th Largest Source of Electricity in Australia
- US Confirms Reimposition of Oil Sanctions against Venezuela
- EU, Industry Players Ink Charter to Meet Solar Energy Targets
- Analyst Says USA Influence on Middle East Seems to be Fading
- Russian Ships to Remain Banned from US Ports
- Brazil Court Reinstates Petrobras Chair to Divided Board
- EIB Lends $425.7 Million for Thuringia's Grid Upgrades
- Var Energi Confirms Oil Discovery in Ringhorne
- Seatrium, Shell Strengthen Floating Production Systems Collaboration
- An Already Bad Situation in the Red Sea Just Got Worse
- What's Next for Oil? Analysts Weigh In After Iran's Attack
- USA Regional Banks Dramatically Step Up Loans to Oil and Gas
- EIA Raises WTI Oil Price Forecasts
- How Likely Is an All-Out War in the Middle East Involving the USA?
- Venezuela Authorities Arrest Two Senior Energy Officials
- Namibia Expects FID on Potential Major Oil Discovery by Yearend
- Oil Markets Were Already Positioned for Iran Attack
- Is The Iran Nuclear Deal Revival Project Dead?
- Petrobras Chairman Suspended
- Oil and Gas Executives Predict WTI Oil Price
- An Already Bad Situation in the Red Sea Just Got Worse
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Oil and Gas Execs Reveal Where They See Henry Hub Price Heading
- Equinor Makes Discovery in North Sea
- Macquarie Strategists Warn of Large Oil Price Correction
- DOI Announces Proposal for Second GOM Offshore Wind Auction
- Standard Chartered Reiterates $94 Brent Call
- Chevron, Hess Confident Embattled Merger Will Close Mid-2024
- Analysts Flag 'Remarkable Feature' of 2024 Oil Price Rally