Global refinery closures by yearend 2016 could be more than the previously announced 1 million b/d of capacity, Energy Security Analysis Inc. reported. “The total capacity at risk of closure by that time is as high as 2 million b/d,” ESAI Refining Manager Christopher Barber said.
Weaker refining margins in Europe and Asia will put more pressure on marginal operations as changing government policies put even more capacity at risk in Asia and Russia, the Wakefield, Mass., energy and power market research and strategic advisory firm said in its latest Global Refining Outlook.
ESAI said refiners in Europe already plan to rationalize 320,000 b/d of capacity by yearend 2016, while petroleum product manufacturers in former Soviet Union countries intend to shut another 280,000 b/d. Refiners in Taiwan, Australia, and Japan plan to cut another 420,000 b/d, the analysis said.
Reports also suggest that Saudi Aramco is planning to close its 88,000-b/d Jeddah refinery, now that two new joint venture refineries are operating. Altogether these announced capacity rationalizations total 1.1 million b/d, ESAI said.
“On top of announced cuts, policy changes in Japan, China, and Russia put as much as an additional 700,000 b/d of capacity at risk of closure by the end of 2016,” Barber said.
Another round of rationalization is expected in Japan by March 2017 under a new directive from the country’s Ministry of Economy, Trade, and Industry, putting as much as 300,000 b/d at risk of closure before the March 2017 deadline, he said.
A new crude import quota policy for independent refiners in China will put as much as 240,000 b/d of additional capacity at risk of closure, Barber said. ESAI also has identified another 160,000 b/d of capacity at risk in Russia, as changing product export duties mean refiners there are less protected from international price dynamics, he noted.
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