Asia refineries will stay competitive<\/p>\n
SINGAPORE (Reuter): Asia's oil refineries will remain
\ncompetitive in the long run despite rising capacity as demand for
\nenvironmentally-friendly oil products outstrips supplies, the
\nHonolulu-based think tank East-West Center said.<\/p>\n
\"Limited refining complexity, together with rising demand for
\nmiddle distillates, contributes to continuing product imbalances
\nin the region,\" Sara Banaszak and Fereidun Fesharaki said in the
\ncenter's report on Asian refining.<\/p>\n
\"By 2005, nearly 45 percent of Asian demand will be for
\nkerojet and gas oil (diesel), causing continuing product
\nimbalances,\" said the report received in Singapore on Wednesday.<\/p>\n
Along with strong demand growth, increasingly strict oil
\nproduct specifications will have also a major impact on refining
\nprofit margins, they said.<\/p>\n
India aims to lower diesel sulphur content to 0.25 percent by
\n1999, while Taiwan and Thailand seek to reduce it to 0.05 percent
\nby 1999. Japan will use 0.05 percent sulphur diesel in October
\nfollowed by South Korea next year.<\/p>\n
Japan, New Zealand, South Korea and Thailand now use entirely
\nunleaded gasoline, while Taiwan is phasing out lead rapidly.
\nMalaysia plans to be 100 percent unleaded by 2000 while India and
\nChina plans to do so by 2000.<\/p>\n
Part of the demand for low sulphur diesel can be met by
\nTaiwan's Formosa Plastic Group's refinery due to start by 1999
\nwith a 240,000 barrel-per-day (bpd) diesel output and another
\n130,000-bpd by 2000.<\/p>\n
The report said the delay in adding new capacities between
\n1997 and 1999 could help refining margins recover in the medium
\nterm. It said crude refining capacity would rise more slowly over
\nthe next two years than in the last two years.<\/p>\n
Planned crude refining additions in 1997 amount to 577,000
\nbpd, or a 3.2-percent growth, compared with 1.2 million bpd in
\n1996. In 1998, the additions would dip to a low of 344,000 bpd or
\n1.9 percent against demand growth of 4.2 percent.<\/p>\n
In 1999 and 2000, capacity increases will recover to 3.4
\npercent a year, or 660,000 bpd, which will still be less than the
\n4.2-percent demand growth.<\/p>\n
\"However, new capacity currently planned for 2000 and beyond
\nwill shrink the gap between the region's demand for oil products
\nand its basic crude distillation capacity,\" the report said.<\/p>\n
Projected capacity additions after 2000, which would see a
\n4.6-percent growth or about 1.2 million bpd, could outpace demand
\nof 3.5 percent, although these projects are not yet under
\nconstruction and many may never be built, it said.<\/p>\n
Whether they are built would depend on political stability,
\nsubsidies on domestic prices and difficulties in attracting
\nforeign investments, the report said.<\/p>\n
By 2005, Asia's refining capacity could match demand at
\nslightly more over 25 million bpd, or even surpass it, following
\na rise in basic capacity of more than five million bpd.<\/p>\n
Asia now has more crude distillation capacity than North
\nAmerica but only half its complex refining capabilities such as
\ncatalytic crackers, hydrocracking and naphtha treatment.<\/p>\n
Even the region's cracking capacity is aimed at maximizing
\ngasoline production, \"a poor fit to demand in a region where
\ndiesel consumption dominates\", the report said.<\/p>\n
The proposed construction of secondary processing units in
\nAsia will also shrink the gap with North America and overtake
\nWestern Europe, it said.<\/p>\n
The report said that to enjoy profits beyond 2000, oil
\ncompanies in Asia needed to focus on upgrading existing
\nrefineries, rather than build new plants \"until they received
\nadequate incentives\".<\/p>\n
Based on Arab Light crude, the long-term outlook for cracking
\nor secondary processing margins was around $7 per barrel,
\ncompared with $6 in the first quarter of 1997, it said.<\/p>\n
It said the increases in basic and complex refining capacities
\nwould not eliminate product imports to Asia.<\/p>\n
\"Globalized markets and depressed transportation costs are
\nencouraging product trade to meet Asian demand,\" it said.<\/p>\n
\"This adds to pressure on merchant refineries. In fact, the
\nAsian refining industry may well experience a set of
\nglobalization shocks, which could ease over time as players learn
\nand adjust to the global market place.\"<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/asia-refineries-will-stay-competitive-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}