Global refinery capacity growth will slow between 2016 and 2020, according to a new study by ESAI Energy. ESAI said refiners will add just 770,000 barrels per day of capacity on average between 2016 and 2020, compared to 1.1 million barrels per day this year.
Slower growth is expected even in countries where refinery investments have spiked in recent years. ESAI expects the U.S. to add just 400,000 barrels per day of new capacity between 2017 and 2020. U.S. refiners will, however, complete projects that will add 550,000 barrels per day by 2016. Brazil is expected to complete work on its 230,000-barrel-per-day RNEST plant this year and many megarefineries being built in the Middle East are too far along to cut off investment. Refiners in both regions are expected to wind down other projects and scale back expansion plans.
Refinery capacity growth will slow down as refiners in oil exporting countries such as Algeria, Angola, Iran and Venezuela cut spending amid lower oil revenue. Other markets such as Malaysia, Mexico and Indonesia that import and subsidize petroleum products will have a reduced need to add refining capacity as import prices remain low.
ESAI said reduced capital spending, combined with increased demand for middle distillates, will boost refining margins by the end of the decade.
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