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The world’s refining capacity is expected to increase by nearly 3 million barrels per day (bpd) by the end of next year when at least nine refinery projects are expected to start up in the Middle East and Asia, the EIA said on Tuesday.
The expansion of refinery capacity would offset the losses in global refining capacity in 2020 and 2021 when several refineries around the world—including 1 million bpd capacity in the United States—were either permanently closed or slated to be converted to produce biofuels.
Tight refining capacity, coupled with rebounding fuel demand post-COVID lockdowns, has been one of the main reasons for soaring refining margins so far this year and for high fuel prices everywhere in the world, although the triple-digit crude oil prices have been the main culprit for record high gasoline and diesel prices.
Operable refining capacity in the United States hit a nearly decade low in 2022, the EIA’s latest Refining Capacity Report showed in June. U.S. refining capacity fell this year to 17.94 million barrels per day as of January 1, according to the latest EIA data—down from 18.09 million bpd on January 1 last year. U.S. refining capacity is now the lowest it’s been since 2014.
Net global refining capacity additions—the difference between total new capacity minus capacity that has closed—fell last year for the first time in three decades, per data from the International Energy Agency (IEA) cited by the EIA. This year, the net additions are expected at 1.0 million bpd and at another 1.6 million bpd in 2023.
Refiners in China and Malaysia in Asia, and Saudi Arabia, Kuwait, Iraq, and Oman in the Middle East, are all expecting new refinery projects to start up this year and next, according to the EIA.
“Although the potential for project complications and cancellations is always a significant risk, these projects could otherwise account for an increase of nearly 3.0 million b/d of new refining capacity by the end of 2023,” the U.S. administration said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.