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IEA sees ‘profound’ shift in global refining

14 December 2012

The International Energy Agency (IEA) says in its annual Medium-Term Oil Market Report that profound shifts in the regional distribution of oil demand and supply growth will redefine the refining industry and transform global oil trade over the next five years.

The report projects a return to higher OPEC spare production capacity and says today’s weak economic environment has reduced expectations of oil demand growth for the medium term. But the reallocation of demand by region and key product, which has been underway for the last 15 to 20 years, is expected to continue. 

Demand from non-OECD economies is forecast to overtake that in the OECD as early as 2014.  The East of Suez region will account for most of the growth, led by Asia, the Former Soviet Union and the Middle East. Distillate demand is also expected to growth much faster than that for other products, so that gasoil and diesel by the end of the forecast period will account for the largest share by far of the demand barrel – a challenge for refiners and end-users alike. 

On the supply side, most of the growth will come from the Americas, buoyed by the transformative power of advanced extractive technologies applied to light, tight oil deposits in the US and the Canadian oil sands that has exceeded earlier expectations. 

Among OPEC producers, Iraq stands out as its production capacity is expected to enter a new growth phase, which may continue even beyond the forecast period. 

The report also notes a continued rebalancing of refining capacity, with expansions in Asia and the Middle East more than offsetting continued attrition in the OECD.

Internationally traded crude volumes are expected to decline sharply, as rising domestic production reduces North America’s import needs and more Middle East oil is kept at home to satisfy growing regional demand rather than exported. Product trade may grow in both volume and scope, however.

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