Thad Pittman, Senior Researcher
New refinery projects around the world are expected to continue their development in the short term, mainly due to persisting demand that appears to have not yet reached its peak. China has considerable capacity due to produce in the next few years as it continues to build as a major fuel exporter. New capacity in India, Mexico, the Middle East, and Nigeria are adding refining capacity as well. However, the advent of the approaching energy transition has slowed some spending, although the pace of the transition has been slower than anticipated.
2023 brought the progression of several significant projects, such as the approachingstartup of the 650,000 barrel per day (bpd) Dangote refinery in Nigeria with full capacity possible by the end of 2024, the anticipated commercial output from the 340,000 bpd Dos Bocas (also known as Olmeca) refinery in Mexico which is expected to reach 243,000 bpd during this year with full capacity targeted in 2025, and the 615,000 bpd Al Zour refinery in Kuwait that began its initial operations late last year with a quick ramp up in capacity. These projects have seen numerous delays over the years but are now pushing towards their respective full capacity expectations.
In the United States, the 250,000 bpd BLADE refinery expansion in Texas began operations during 2023, and it could be the last major refinery project on the horizon for the U.S. primarily due to policy restrictions and a focus on decarbonization efforts. The committing of capital for new domestic refineries that would need many years to develop is becoming increasingly unlikely in an arena with strict government policies in place. It may be a good time to be a United States refiner, but it doesn’t appear to be a good time to become one.
Looking ahead, the Asia-Pacific region appears poised to be a leader in new refining capacity with several refineries and expansions under development. In Indonesia, Pertamina’s Balikpapan refinery expansion is expected to take capacity to 360,000 bpd from 260,000 bpd during 2024. This refinery will also be able to produce fuel to Euro V emission standards. In India, the long delayed Barmer refinery with a 181,000 bpd capacity is currently expected to commence initial operations in the first quarter of 2024. Expansions are expected in the short term in India as well, such as Nayara Energy's Vadinar expansion expected to add 515,000 bpd by 2027 and IOCL’s developing expansions in Panipat and Paradip. However, India has had land acquisition issues in recent years, so smaller refinery projects could become a new pattern in the country. The 50,000 bpd Visakhapatnam Refinery Expansion and the 86,000 bpd Koyali Refinery Expansions both due in 2024 are some examples of this type of project.
But for the primary refinery additions in the Asia Pacific region, China leads the way with several projects on the horizon. Four upcoming refineries of note here are being developed with a combined capacity of approximately 1.2 million barrels per day, such as the 400,000 bpd Yulong project due in late 2024, the 300,000 bpd Panjin refinery in the Lioaning province by early 2026, the 320,000 bpd Gulei II refinery in late 2025, and the 254,000 bpd Zhenhai II refinery expansion currently expected for mechanical completion in December 2024. In late 2023, China set a new minimum size of 200,000 bpd or more for new crude processing facilities and to ban smaller refineries as the country plans to limit total capacity at 20 million bpd by 2025 to streamline its refining sector and reduce carbon emissions.