30/5/2018 Building for the future: An analysis of global capacity additions

(https://pubads.g.doubleclick.net/gampad/jump?
iu=/40679512/hcp&sz=800x600&t=pos%3Dtop&c=1527696933903)

COPYING AND DISTRIBUTING ARE PROHIBITED WITHOUT PERMISSION OF THE PUBLISHER

2018 (/supplements/2018)
ENGINEERING AND CONSTRUCTION (/SUPPLEMENTS/2018#ENGINEERING-
AND-CONSTRUCTION)

Building for the future: An

analysis of global capacity
additions
Over the past several years, the world has witnessed signi cant capacity growth in all sectors of the
downstream hydrocarbon processing industry (HPI). The majority of this growth has taken place in
Asia-Paci c, the Middle East and the US
Nichols, Lee (/authors/h/ihydrocarbon-processingi-sta/nichols-lee), Hydrocarbon Processing Sta
Over the past several years, the world has witnessed signi cant capacity growth in all sectors of the
downstream hydrocarbon processing industry (HPI). The majority of this growth has taken place in
Asia-Paci c, the Middle East and the US. These three regions will continue to invest billions of dollars
to increase oil and gas processing () capacity into the early 2020s.

Although the Asia-Paci c, Middle East and US regions will invest heavily in new production capacity,
other regions, such as Africa and Europe—primarily Eastern Europe, Russia and the Commonwealth of
Independent States (CIS)—are striving to invest in additional downstream capacity to satisfy
increasing fuels and plastics demand, and to mitigate petroleum product imports.

These investments will ensure that global demand for petroleum products is met in the future.
However, the present and future outlooks for the downstream HPI vary immensely by region.

Re ning. According to the US Energy Information Administration (EIA), global fuels consumption
increased to approximately 98.5 MMbpd in 2017. Depending on which forecast is consulted, global
oil demand is expected to increase by 6 MMbpd–7 MMbpd, reaching 104 MMbpd–106 MMbpd by
2023 (FIG. 1). In its Oil 2018 report, the International Energy Agency (IEA) forecasts that
approximately 25% of the increase in oil consumption—nearly 1.7 MMbpd—will be from demand for
petrochemical feedstocks.

http://www.hydrocarbonprocessing.com/supplements/2018/engineering-and-construction/building-for-the-future-an-analysis-of-global-capacity-ad… 1/7
30/5/2018 Building for the future: An analysis of global capacity additions

(/media/6853/nichols- g-01.gif)
FIG. 1. Global oil demand (MMbpd) from three major industry forecasts, 2016–2023. Source: OPEC, IEA and the US EIA.

(/media/6854/nichols- g-02.gif)
FIG. 2. Oil demand (MMbpd) by region, 2017–2023. Source: IEA.
The majority of new oil demand will come from developing nations in the Asia-Paci c region (FIG. 2),
primarily China and India. By 2023, Chinese and Indian oil demand will increase by 1.5 MMbpd and
1.1 MMbpd, respectively. Other Asian countries are forecast to account for an additional 1.3 MMbpd
of new oil demand by the early 2020s. Other notable demand regions include the Middle East and
Africa, which account for approximately 1.6 MMbpd of new oil demand in the forecast period. In
contrast, OECD countries are expected to see a stagnation or decline in oil demand over the longer
term due to increased vehicle eciency, as well as the adoption of more electric vehicles
(EVs)/hybrid-electric vehicles (HEVs) and natural gas-powered vehicles.

(/media/6855/nichols- g-03.gif)

http://www.hydrocarbonprocessing.com/supplements/2018/engineering-and-construction/building-for-the-future-an-analysis-of-global-capacity-ad… 2/7
30/5/2018 Building for the future: An analysis of global capacity additions

FIG. 3. Global oil demand vs. re ning capacity, 2017–2023. Source: IEA and Hydrocarbon Processing’s Construction Boxscore
Database.
By 2023, global re ning capacity should increase by approximately 8 MMbpd to more than 106
MMbpd. As shown in FIG. 3, the global re ning industry will stay in a state of overcapacity through
the early 2020s. However, low utilization rates in regions such as Africa and Latin America will limit
the drag on the oversupply of re ned fuels. The majority of this new capacity is being built in the Asia-
Paci c and Middle East regions. Combined, these two regions will account for nearly 6 MMbpd of new
distillation capacity by the mid-2020s.

New/active projects. According to Hydrocarbon Processing’s Construction Boxscore Database,

nearly 200 re ning projects have been announced over the past 3 yr. The vast majority of new
re ning projects continue to be in non-OECD countries. The Asia-Paci c region has led in new re ning
project announcements for several years, with the majority of these projects located in China and
India.

In total, Hydrocarbon Processing’s Construction Boxscore Database is tracking more than 400
re ning projects around the world. The Asia-Paci c and Middle East regions account for more than
half of active re ning projects. A market share analysis on active re ning projects by region shows:

Africa—7%
Asia-Paci c—30%
Canada—3%
Europe (including Russia and the CIS)—15%
Latin America—12%
Middle East—23%
US—10%.

(/media/6856/nichols- g-04.gif)
FIG. 4. Forecast of 2018 capital expenditures in the re ning sector. Source: Hydrocarbon Processing’s HPI Market Data 2018.
In 2018, capital expenditures in the global re ning sector are expected to reach nearly $50 B (FIG.
4). Heavy investments are being made in numerous countries to meet increasing demand for re ned
fuels, as well as to comply with recently enacted or looming fuel quality regulations.

Secondary units. Although the addition of approximately 8 MMbpd of new distillation capacity is
expected by the early 2020s, the global re ning industry will witness a boost in secondary
processing capacity, as well. This processing capacity will be added through the construction of
green eld re neries, as well as through plant upgrades and additions. The additional capacity will

http://www.hydrocarbonprocessing.com/supplements/2018/engineering-and-construction/building-for-the-future-an-analysis-of-global-capacity-ad… 3/7
30/5/2018 Building for the future: An analysis of global capacity additions

provide these facilities with complex units to produce high-value, low-sulfur and ultra-low-sulfur fuels.
More secondary processing units are needed to meet new fuel quality regulations that are being
enacted by dozens of countries around the world.

(/media/6858/nichols- g-05.gif)
FIG. 5. Forecast of secondary processing capacity from existing projects by year, 2017–2022. Source: OPEC World Oil Outlook 2017.
According to OPEC’s World Oil Outlook 2017, more than 11 MMbpd of secondary processing unit
capacity will begin operations by 2022 (FIG. 5). The majority of new secondary unit capacity—
approximately 6.6 MMbpd—will be for new desulfurization capacity. Conversion and octane-boosting
units comprise 3.2 MMbpd and 1.7 MMbpd, respectively.

The Asia-Paci c and Middle East regions will be the leaders in new desulfurization capacity. Both
regions are building and/or upgrading existing re ning capacity to meet low-sulfur regulations and to
produce transportation fuels that adhere to Euro 4, Euro 5 and Euro 6 standards. The ability to create
high-value products allows these regions to compete for market share in established and developing
fuel markets.

From 2017–2022, OPEC forecasts that additional conversion capacity will be led by new
hydrocracking capacity. A breakdown of new conversion capacity includes more than 1.3 MMbpd of
hydrocracking capacity, more than 1 MMbpd of coking/visbreaking capacity and approximately 800
Mbpd of uid catalytic cracking (FCC) and residual FCC capacity. Similar to new desulfurization
capacity, the majority of new conversion capacity will be located in Asia and the Middle East.

However, Russia and the Caspian region will witness the startup of more than 400 Mbpd of new
conversion capacity by the early 2020s. The additional Russian capacity stems from the country’s
$55-B modernization program, which has focused on upgrading and conversion capacity, as opposed
to distillation capacity. The additional secondary units will allow Russia to produce higher-grade fuels
that meet strict domestic fuel speci cations, and to promote high-value product exports to regions
that demand them, such as Western Europe.

Clean fuels. With the increase in demand for re ned fuels, additional consumption equates to higher
emissions rates and, in turn, more airborne pollutants. To combat these eects, dozens of countries
around the world are increasing pressure on re ners to reduce the amount of sulfur within
transportation fuels, primarily in diesel and gasoline. Some of the major policies governing the
mandatory decrease in emissions and the allowable amount of sulfur in fuels include Tier 3 fuel
regulations in the US and Canada, National 5/6 and Beijing 6 in China, Bharat Stage 6 in India, Euro 5
and Euro 6 clean fuel production projects in the Middle East, higher ethanol/biofuel blending rates in
several countries and the adoption of EVs/HEVs and natural gas-powered vehicles.

Over the past decade, dozens of nations around the world have made capital-intensive investments to
their facilities to reduce sulfur levels in transportation fuels. With the addition of new legislation
restricting the amount of sulfur in transportation fuels, re ners will continue to invest billions of
dollars to adhere to new fuel quality regulations.

http://www.hydrocarbonprocessing.com/supplements/2018/engineering-and-construction/building-for-the-future-an-analysis-of-global-capacity-ad… 4/7
30/5/2018 Building for the future: An analysis of global capacity additions

Some of the most intense investment will be seen in the increase in desulfurization capacity.
According to OPEC’s World Oil Outlook 2017, approximately 6.6 MMbpd of new desulfurization
capacity will be added by the early 2020s. The majority of this capacity will be in non-OECD
countries in the Asia-Paci c and Middle East regions.

Petrochemicals. The petrochemical industry has seen incredible growth over the past several years.
According to Hydrocarbon Processing’s Construction Boxscore Database, more than 250 new
petrochemical projects have been announced since 2015. The global petrochemicals sector
represents approximately 42% of all downstream projects that have been announced over the past 3
yr.

In total, petrochemical producers have announced more than $100 B in new petrochemical capacity
investments in the past 3 yr. The majority of this new capacity is in the Asia-Paci c region, where
developing nations are showing increasing demand for petrochemical products. To satisfy this uptick
in demand, Asian-Paci c nations are investing heavily to boost petrochemical processing capacity.

(/media/6857/nichols- g-06.gif)
FIG. 6. Total active petrochemical market share by region. Source: Hydrocarbon Processing’s Construction Boxscore Database.
Within the petrochemical sector, Asia-Paci c, the Middle East and the US are the leading regions in
active projects (FIG. 6). These three regions represent approximately 75% of total active
petrochemical projects. The Asia-Paci c region is led by projects in China and India. Both countries
are boosting their production of petrochemical products to meet increasing demand.

Over the past decade, the Asia-Paci c region has been the leader in total active projects in all sectors
of the downstream processing industry. Developing nations in the region have made signi cant
investments to increase downstream production capacity to meet increasing demand for
transportation fuels and petrochemicals. The region’s demand for petrochemical products will
continue for the foreseeable future. This demand is led by China and India. Both countries have
growing populations with more disposable incomes that demand more re ned fuels and
petrochemical products.

To help mitigate imports and to satisfy robust demand, many Asia-Paci c nations are investing in the
expansion and debottlenecking of petrochemical units, as well as in the construction of grassroots
petrochemical complexes. These capital-intensive investments include increased integration between
re ning and petrochemical facilities to increase eciency and value.

The Asia-Paci c region accounts for nearly 40% of active petrochemical projects globally. The
region’s petrochemical production capacity increases will be led by China, followed by India. China
accounts for nearly half of all active petrochemical projects in the region. The country is continuing to
invest heavily in its petrochemical sector to satisfy increasing domestic demand. A sizable portion of
the country’s new petrochemical capacity will be built in conjunction with re ning and petrochemical
integrated complexes. In total, China will add nearly 15 MMtpy of new ethylene capacity by 2025

http://www.hydrocarbonprocessing.com/supplements/2018/engineering-and-construction/building-for-the-future-an-analysis-of-global-capacity-ad… 5/7
30/5/2018 Building for the future: An analysis of global capacity additions

through various production routes. Whether through conventional or unconventional methods, the
nation’s domestic ethylene capacity is forecast to increase to 35 MMtpy–40 MMtpy by the mid-
2020s.

Like China, India is investing substantial capital in new petrochemical capacity to meet surging
domestic demand. Indian petrochemical producers are planning to invest approximately $35 B to
boost petrochemical production. Many of the nation’s new petrochemical capacity will be integrated
into existing re ning operations or through grassroots integrated complexes.

Other countries, such as Indonesia, Malaysia, South Korea and Vietnam, are making substantial
investments to increase their petrochemical product oerings, as well. These nations have ambitious
plans to substantially increase investments to strive for self-suciency.

The Middle East is making a concerted eort to diversify its downstream portfolio as a means of
reducing its reliance on crude oil export revenues. Over the past several years, the region has made
capital-intensive investments in all sectors of the oil and gas industry. This includes multibillion-dollar
petrochemical complexes to meet global demand.

The US is fully monetizing its shale gas production. The readily-available, cheap ethane feedstock has
provided a boon for petrochemical producers, especially along the US Gulf Coast. The region will
witness more than 10 MMtpy of new ethylene capacity begin operations by the end of the decade. A
second wave of new ethane crackers could add more than 5 MMtpy of new capacity post 2020, and
could include the genesis of a new petrochemical hub in the northeast US. Many of these projects
include ethylene derivative units, with the largest increase in new polyethylene (PE) capacity.
Including both integrated and grassroots PE plants, the US will add approximately 8 MMtpy of new PE
capacity by 2020. HP

The Author
Nichols, Lee (/authors/h/ihydrocarbon-processingi-sta/nichols-lee) - Hydrocarbon
Processing Sta, Houston, Texas

(/authors/h/ihydrocarbon-
processingi-
sta/nichols-
lee)

Related Articles
Digital: Maximize return on capital investment with predictive maintenance
(/magazine/2018/may-2018/columns/digital-maximize-return-on-capital-investment-with-
predictive-maintenance)
Supply Chain: Sustainable journey toward global competitiveness—A study
(/magazine/2018/may-2018/columns/supply-chain-sustainable-journey-toward-global-
competitiveness-a-study)
Re ning: Winning strategies for oil producers (/magazine/2018/may-2018/columns/re ning-
winning-strategies-for-oil-producers)

Reliability: Preserve what worked well in 1980 (/magazine/2018/may-2018/columns/reliability-

preserve-what-worked-well-in-1980)
http://www.hydrocarbonprocessing.com/supplements/2018/engineering-and-construction/building-for-the-future-an-analysis-of-global-capacity-ad… 6/7
30/5/2018 Building for the future: An analysis of global capacity additions

Editorial Comment (/magazine/2018/may-2018/columns/editorial-comment)

People (/magazine/2018/may-2018/departments/people)

From the Archive

Viewpoint: “Intelligizing” the re nery for business sustainability (/magazine/2016/june-
2016/columns/viewpoint-intelligizing-the-re nery-for-business-sustainability)
Business Trends: Global petrochemical overview—Part 1 (/magazine/2016/april-2016/trends-
and-resources/business-trends-global-petrochemical-overview-part-1)
Maximize petrochemicals in the FCCU to boost re nery margins, improve gasoline pool quality
(/magazine/2016/february-2016/special-report-clean-fuels-and-the-environment/maximize-
petrochemicals-in-the-fccu-to-boost-re nery-margins-improve-gasoline-pool-quality)

Business Trends: Clean fuels—a global shift to a low-sulfur world (/magazine/2016/february-

2016/trends-and-resources/business-trends-clean-fuels-a-global-shift-to-a-low-sulfur-world)
Top seven causes for lost ole n production (/magazine/2015/april-2015/special-report-
petrochemical-developments/top-seven-causes-for-lost-ole n-production)

http://www.hydrocarbonprocessing.com/supplements/2018/engineering-and-construction/building-for-the-future-an-analysis-of-global-capacity-ad… 7/7