Market Update: Asia Ready for a Major Refining Capacity Increase

Market Update: Asia Ready for a Major Refining Capacity Increase

Asia will add the biggest amount of net refining capacity in three years in 2017, further boosting demand for oil in the world’s biggest and fastest growing crude consuming region. New and expanded refineries from China to India will add about 450,000 barrels per day of oil processing capacity, offsetting closures in Japan in 2017. The increase constitutes about 1.5 percent of refining capacity on top of Asia’s total capacity of almost 30 million bpd. According to Sushant Gupta, WoodMac’s Asia Research Director for refining, “Heavy crude demand in particular is expected to rise in 2017 as more Asian facilities undergo upgrading and new … refineries come online.”

China National Offshore Oil Corp (CNOOC) is about to start constructing a new 200,000-bpd refinery in southern China while PetroChina plans to start a 260,000-bpd refinery in Yunnan. Chinese independent refiners are also expected to import an additional 200,000-400,000 bpd of oil, research consultancy Energy Aspects estimates, and an upgrade by Taiwan’s CPC at its Talin refinery will boost crude and condensate demand by 100,000 bpd. Vietnam is poised to complete a new 200,000-bpd refinery, while India’s Bharat Petroleum Corp Ltd is preparing an expansion in Kochi that will include a new 210,000-bpd crude oil distillation unit. All of these additions will more than offset a 400,000 bpd decline in refining capacity in Japan by early April due to decreasing local demand.

In order to satisfy Asia’s demand, Iraq has already inked new Basra Heavy deals, while Iran expects to complete a pipeline and terminal to export heavy crude West Kharoon in 2017. Kuwait also said it is readying to restart production from oilfields jointly operated with Saudi Arabia. The increase in capacity will tighten Asia’s oil market as it coincides with projected production cuts by oil producers like the Organization of Petroleum Exporting Countries (OPEC).

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