Asia-Pacific oil refiners squeezed: Expert<\/p>\n
SINGAPORE (AFP): Asia-Pacific oil refiners are facing a
\nsqueeze on margins for the next two years amid expanding regional
\ncapacity, competition from imports and a glut of oil products, an
\nexpert forecast yesterday.<\/p>\n
\"While oil product demand remains strong, there is substantial
\nrefining capacity under construction,\" Fereidun Fesharaki, head
\nof the Hawaii-based think-tank East-West Center, told an annual
\nindustry conference here.<\/p>\n
\"Some two million barrels per day of capacity will come on
\nstream during the 1996-98 period in Korea, Malaysia, Thailand,
\nPhilippines, Taiwan, China, Japan and India,\" he said. \"This will
\ninevitably put downward pressure on prices.\"<\/p>\n
The region would account for the bulk of new refining capacity
\nto come on stream over the next two years, taking Asia-Pacific
\ntotal capacity to about 19.25 million barrels per day by 1998.<\/p>\n
At present, the region is short of about 1.8 million barrels
\nper day of petroleum products such as liquefied petroleum gas,
\nnaphtha, gasoil, fuel oil and jet fuel, experts say.<\/p>\n
Fesharaki said 1995 was the \"worst year\" in a decade for Asian
\nrefining business, with margins dropping to around two dollars a
\nbarrel.<\/p>\n
\"This year has been a good year all around, but margins cannot
\nbe expected to be sustained for long,\" he said, adding that
\nmargins have been dropping in the second half of the year.<\/p>\n
\"Fundamentally, the world is awash in products ... that is the
\nreason why we are suffering poor margins and we will continue to
\nsuffer poor margins for a couple of years to come,\" he said.<\/p>\n
He warned that planned regional refinery projects risked being
\nuneconomical given the market conditions, but they are not alone
\nin feeling the pinch.<\/p>\n
Environmental costs have reduced if not eliminated the chances
\nof refiners' profitability in the United States despite growing
\ndemand while in Europe, slow demand is coupled with intense
\ncompetition and excess capacity.<\/p>\n
He forecast that Europe would be forced to shut down several
\nhundreds of thousands of barrels of refining capacity.<\/p>\n
Fesharaki said Middle Eastern export capability of oil
\nproducts would rise by about 600,000 barrels per day to three
\nmillion barrels per day by 1998 on the back of expansions and the
\nrehabilitation of Kuwaiti refineries.<\/p>\n
Product exports from the Middle East to Asia are likely to
\nrise substantially as a result of lower demand growth in Saudi
\nArabia and Iran and a major new push into export refining from
\nAbu Dhabi.<\/p>\n
Invest<\/p>\n
Middle East oil exporters are eager to invest in Asian
\nrefineries, with expected Saudi refinery ventures of one million
\nbarrels per day by 2000 and increasing Kuwaiti focus on India,
\nPakistan and Thailand.<\/p>\n
Fesharaki said a growing trend towards globalization and
\nderegulation in Asian oil markets, encouraging imports and
\nreducing the size of the regional refining pie, were also
\ncontributing to an \"indigestion problem for the (regional
\nrefining) market.\"<\/p>\n
\"In a globalized market, deregulation has pretty much
\ndisastrous consequences for the people who are in it,\" he said.<\/p>\n
He said the key issue for Asia was no longer the difference
\nbetween regional demand and refining capacity.<\/p>\n
\"What matters is the difference between Asian demand and the
\nrest of the world. And the rest of the world has plenty of
\ncapacity,\" he said.<\/p>\n
In 1998, Asia-Pacific net import requirements for petroleum
\nproducts are expected to rise to around two million barrels a day
\nas demand growth remains robust.<\/p>",
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