Asia-Pacific Refining Outlook
Asia-Pacific Refining Outlook
From a global perspective a favorable outlook for refining economics and an outlook for continued growth in demand during the early part of the decade generated initiatives for refining expansion. Announced capacity expansions are well above the capacity growth experienced in the past. Additional major projects are at various stages of consideration, which will add to the 2014-2015 capacity expansion. These initiatives include large refineries/expansions in China, India and the Middle East. Additional refineries and expansions are underway and/or have been announced for all other regions.
The table below summarizes global refining crude oil distillation and downstream capacities. The table also shows identified capacity expansions for 2014 to 2015 and expansions for 2016 to 2020. The expansions take into account announced shutdowns and anticipated refinery rationalization. The expansion projects include all identified new refineries, as well as crude oil and downstream expansions at existing refineries deemed probable to be completed.
Refining capacity at the close of 2013 was 93.18 million b/d. The net of expansions and shutdowns will add 2.21 million b/d of crude oil distillation capacity by 2015, a 2.3% increase. For the time period of 2016 to 2020, another 8.25 million b/d of capacity additions have been identified and projected.
Refining capacity in Asia-Pacific has expanded in recent years in conjunction with strong demand growth. By January 2014, Asia-Pacific refinery crude oil distillation capacity reached 30.30 million b/d.
Regional average refinery capacity utilization was 85% in 2013. A large portion of underutilized capacity in the region is the independent refinery sector in China; in particular, small local refineries. This portion of capacity has run below 50% utilization.
Outlook through 2020
Crude oil distillation and downstream refining capacities for the Asia-Pacific region are summarized in the table below. The table also shows identified refinery capacity expansions expected to be completed over the 2014-2020 period, including anticipated shutdowns and capacity rationalization.
Many of these projects are in early planning stages and have limited information on specific capacity plans, particularly for downstream processing capacity. In particular, there are a number of large, new refinery projects planned for China for which configuration details are not well-defined.
The planned capacity expansion will result in the crude distillation capacity in Asia-Pacific, reaching 34 million b/d by 2020.
The Asia-Pacific region is expected to add 0.14 million b/d of reforming capacity by 2020. Isomerization capacity will add by 0.09 million b/d and alkylation capacity is expected to increase by 0.06 million b/d.
The Asia-Pacific region is short on hydroprocessing capacity. By 2020 Asia is expected to need 4.48 million b/d of additional hydrocracking capacity. The region is also expected to add coking capacity that will increase to 2.46 million b/d in 2020 from current level of 2.21 million b/d. Additionally, it is expected that catalytic cracking will increase to 6.14 million b/d by 2020 from current level of 5.51 million b/d, and hydrocracking capacity will increase to 3.38 million b/d by 2020 from current level of 3.11 million b/d.
The summary of the expected capacity of conversion, hydroprocessing, light oil processing and crude distillation out to 2020 is provided below.
Scheduled net expansions will add about 1.00 million b/d by the end of 2015. An additional 7.76 million b/d capacity projects have been announced for completion between 2016 and 2020. These projects are in various stages of planning or discussion and represent an optimistic upper range of possible projects. Stratas Advisors estimates that possible projects (noted with an asterisk) will amount to a total of 3.92 million b/d between 2016 and 2020.
Scheduled net expansions, including reduction by 10,000 b/d in the category of less than 50,000 b/d capacity, will add about 1.00 million b/d by the end of 2015. An additional 7.76 million b/d capacity projects have been announced for completion between 2016 and 2020. These projects are at various stages of planning or discussion and represent an optimistic upper range of possible projects. Stratas Advisors estimates that possible projects (noted with an asterisk) will amount to a total of 3.92 million b/d between 2016 and 2020.
Outlook through 2035
Crude distillation capacity is forecasted to increase by an additional 7.89 million b/d from 2020 through 2035 and 11.72 million b/d from 2014 through 2035.
Light oil processing requirements will increase by 1.51 million b/d through 2035. The region currently does not have a large amount of light oil processing capacity, so the expansion represents a substantial addition to existing capacity (42% increase over current capacity). Increases in ethanol and MTBE use will also provide gasoline quality improvement, thereby reducing, to some extent, the need for additional light oil processing.
With marginal demand increasing requirements for light transportation fuels and the share of residual fuel declining, a large portion of incremental crude oil will require conversion facilities. Conversion capacity requirements will increase 45% by 2035.
Coking capacity will be required to reduce residual fuel production and process additional imports of high-sulfur crude oil. Coking capacity requirements will increase 82% by 2035. Catalytic cracking and hydrocracking capacity will satisfy the need for incremental light product; and in particular, low-sulfur middle distillates. Catalytic cracking requirements will increase 22%, and hydrocracking requirements will increase 57%.
Low-sulfur gasoline and diesel will be a major driver of Asia-Pacific refining capacity. Total hydroprocessing requirements will increase by 8.38 million b/d by 2035: 56% of current capacity. Gasoline sulfur reduction will continue across the region on varying schedules. By 2025, the average gasoline sulfur in the region will be below 50 ppm. The associated incremental gasoline hydroprocessing requirement between 2013 and 2025 will be 0.67 million b/d, with another 0.06 million b/d added between 2025 and 2035.
Middle distillate/diesel sulfur reduction will also be implemented at varying schedules throughout the region. By 2035, nearly all on-road diesel (98%) will be 50 ppm or less. Middle distillate desulfurization will be required to accommodate these reductions, provide for reductions in jet fuel sulfur, and handle incremental middle distillate production. Total middle distillate hydroprocessing requirements will increase by 5.27 million b/d, or 67% of current capacity.
The summary of the projected capacity of conversion, hydroprocessing, light oil processing and crude distillation from 2020 through 2035 is shown below.
Projected incremental capacity requirements (crude oil distillation and downstream processing) from 2014 through 2035 are indicated below. Capacity requirements or each five-year period represent incremental requirements over the previous period.
The projected refinery capacity expansions will require support facilities. As is the case in other regions, significant hydrogen generation/purification and sulfur recovery will be needed to support the large expansions in conversion and desulfurization capacity. Hydrogen and sulfur requirements will be very dependent on the technologies employed, available excess hydrogen, and local requirements concerning refinery sulfur emissions and sulfur recovery.
The figure below provides an estimate of incremental hydrogen and sulfur recovery requirements, respectively, for projected Asia-Pacific refining operations between 2014 and 2035. The estimates, detailed below, are based on the use of hydroprocessing for desulfurization, the projected mix of desulfurization and conversion capacity, and the extraction and recovery of sulfur from incremental conversion and desulfurization processing.