Arab refining output up 6% in 2009

The report, released this week, showed the bulk of the increase in 2009 was in the refining production of Iraq, Qatar and Kuwait as capacity in the UAE, Saudi Arabia and other major oil producers has remained almost unchanged. (AP)

New projects and expansion of existing plants boosted the combined Arab refining production capacity by nearly six per cent in 2009 and output is set to surge by at least five million barrels per day within four years.

From around 7.387 million bpd in 2008, the total Arab refining output capacity swelled to a record high of 7.832 million bpd in 2009, the 10-nation Organization of Arab Petroleum Exporting Countries (OAPEC) said in its annual report.

The report, released this week, showed the bulk of the increase in 2009 was in the refining production of Iraq, Qatar and Kuwait as capacity in the UAE, Saudi Arabia and other major oil producers has remained almost unchanged.

The capacity in Iraq, which holds the world’s largest proven oil wealth after Saudi Arabia and Iran, soared from around 597,000 bpd in 2008 to nearly 846,000 bpd in 2009 as the conflict-battered Arab country is pushing ahead with major projects to rehabilitate its war-damaged hydrocarbon sector.

Kuwait’s refining output grew from around 889,000 bpd to 936,000 bpd while that of Qatar more than doubled from 137,000 bpd to 283,000 bpd, said the Kuwaiti-based OAPEC, a key Arab League establishment.

Refining in the UAE and Saudi Arabia remained at around 798,000 bpd and 2.095 million bpd respectively while Egypt also maintained output at 725,000 bpd. Algeria’s refining capacity stood at 463,000 bpd while production was estimated at around 378,000 bpd inn Libya, 262,000 bpd in Bahrain, 240,000 bpd in Syria, 232,000 bpd in Oman, and154,000 bpd in Morocco.

In a previous report, OAPEC expected new projects to boost the combined Arab refining capacity by more than five million bpd within four years.

Most of the increase is expected to come from the UAE, Saudi Arabia and Kuwait, which hold over 40 per cent of the world’s extractable crude deposits.

The new projects could cost at least $100 billion and would boost production to 12.425 million bpd by the end of 2014, an OAPEC group said.

The projects involve the construction of new refineries and expansion of existing units and are designed to meet a steady growth in domestic consumption and external demand, according to the report.

“These projects will add nearly 5.03 million bpd to the Arab refining capacity…but they are beset with challenges and obstacles which could lead to postponement or abolition of some of them, mainly those related to new refineries,” it said.

“These obstacles include shortage of funding and low investment return because refining ventures are normally not highly profitable…another challenge is the state of uncertainty prevailing the energy market due to ambiguities surrounding the global demand for refined products as a result of lack of transparency in most consumers about forecasts on future demand.”

OAPEC said Arab refiners also face the problem of a growing trend by Western consumers to support the production of alternative fuel with the aim of reducing their import of refined products from foreign markets.

“Another key challenge is the sharp fluctuations in costs of refining projects, which have prompted regional countries to repeatedly re-evaluate their costs…the situation has been aggravated by the global financial crisis as it has caused fears among investors seeking to participate in those projects.”

The study showed Arab nations currently have 64 refineries, pumping nearly 7.8 mbpd in 2009 compared with 7.2 million bpd in 2006.

The study did not mention the costs of the refining projects in the region but OAPEC’s affiliate, APICORP, estimated them at around $115 billion.

In a recent research, APICORP said the cancellation or postponement of energy projects in the region has sharply cut estimated investment in the coming years. It said the global credit squeeze had already slashed the energy investment requirements in MENA by nearly $200 billion during 2009-2013.

“The impact on energy investments in MENA evident is our five-year period review (2009-2013) and tentative preview (2010-2014)…in a context of lower demand, our preview points to lower potential capital requirements resulting mainly from lower costs…both the review and the preview point to the upside likely to be capped by further shelving or suspension of key projects.”

 

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