[LINK] Nesa Subrahmaniyan, Bloomberg (via The New Zealand Herald)
SINGAPORE - India's Reliance Petroleum is among
Asian refiners whose profits may shrink as increased fuel-making
capacity causes a glut, analysts say.
Boy, wouldn't you hate it if that happened! (OK, they're talking about another region, but a glut there is bound to drive oil prices worldwide down, right?)
Sounds like what happened back in the 70s, after we were told the world would run out of oil in 30 years.
And, if it does, the development of alternative energy sources will once again cease, as they will not be deemed feasible (That's the bad news, as it keeps us dependent upon Arab oil.)
New plants in Asia threaten fuel profits
By Nesa Subrahmaniyan
The
profit from turning crude oil into fuels in Asia may fall as much as 44
per cent in the next four years when new plants start production, UBS
said in a report. Demand for petrol and other fuels may lag output as
refiners invest in new plants, industry consultant Fereidun Fesharaki
said at the India Oil & Gas Conference in New Delhi last week.
Reliance,
which plans to spend US$6.1 billion ($10 billion) to double the size of
its facility in India by 2008 and make it the world's biggest refinery,
will compete to sell fuel in the US, Europe and Asia. ConocoPhillips
and Total are bidding to build export-oriented plants in Saudi Arabia,
while South Korean companies including S-Oil Corp are expanding.
"Capacity
additions in India pose a threat to future refining margins,"
Fesharaki, president of energy consultant FACTS Energy, said. "If the
products don't go west, then they will head to the Asian market and
margins will be affected."
As new plants start, refiners may
lower operating rates to 89 per cent and the average refining margin,
or profit from processing each barrel of crude oil, may decline to
US$4.50 a barrel in 2010 from US$8 in 2007, UBS said in its report.
Surplus refining capacity in India, the Middle East and other parts of
Asia may be the reason BP, Europe's largest oil company, pulled out of
a proposed US$3 billion refinery project in India last week, Fesharaki
said.
"India has too much capacity and BP may have recognised
that," he said. Fuel demand has exceeded capacity in the Asia-Pacific
region since 2003, boosting refining profit. Last year, global margins
rose to a record after hurricanes in the US shut refineries and
prompted imports from Europe and Asia.
"There has been a
renaissance of sorts in refining investments," Jeet Bindra, president
of global refining at Chevron Corp said in New Delhi. "If all the
refinery projects are completed, we might end up with overcapacity."
Globally, there are 500 refinery projects and 66 new refineries that are being planned, Bindra said.
There will be as much as 10 million barrels a day of new refining capacity added in the next five to 10 years, he said.
Reliance Petroleum's new refinery will process 580,000 barrels of oil a day.
India's
refiners may add one million barrels a day of capacity through 2010,
and China, the world's second-largest oil user after the US, may boost
output by two million barrels a day, according to FACTS.
Middle Eastern refiners may add three million barrels a day by 2012.
The expansions may force refiners in Asia to cut operating rates to 92 per cent by 2010 from 97 per cent in 2007, UBS said.
"India
will remain long on oil products," said Ashok Sinha, chairman of Bharat
Petroleum Corp, India's third-largest oil refiner. "We need to look
into developing our own overseas network or trading desk to sell our
products."
- BLOOMBERG
Recent Comments