The International Energy Agency expects global oil refining capacity growth to outpace global refined product demand growth through 2023, bringing back "familiar feelings of existential angst" to a sector that is already concerned about losing market share to electric vehicles.
From 2017 to 2023, the IEA expects global refinery capacity growth to increase by 7.7 million barrels per day to 106.4 MMbbl/d, as refined product demand growth reaches 88.6 MMbbl/d.
"The gap between refinery capacity growth and refined product demand growth has never been so large in recent history," the IEA said in its "Oil 2018: Analysis and Forecasts to 2023" released March 5.
"Refiners' worries about their future market share are not exaggerated," the report said. "But their main rival is not yet electric vehicles."
According to the report, the IEA expects refined product demand to grow 4.8 MMbbl/d to 88.6 MMbbl/d from 2017 through 2023, as overall liquids demand grows 6.9 MMbbl/d to 104.7 MMbbl/d over the same period, resulting in a 1% decline in refinery market share.
Making up the 2.1 MMbbl/d gap between refined product demand growth and overall liquids demand growth are biofuel demand growth of 0.4 MMbbl/d, coal-to-liquids and gas-to-liquids demand growth of 0.3 MMbbl/d, and oil products from natural gas fractionation plants growth of 1.4 MMbbl/d, the latter of which "go directly to end-users, bypassing refineries," the report said.
"Recent financial reporting shows that downstream earnings started to fade in comparison with upstream earnings boosted by rising crude prices," the report said. "Downstream divisions of vertically integrated oil companies are regularly targeted by restructuring and optimisation that more often than not leave them leaner and less ambitious. With global refining capacity growth almost double the growth rate of demand for refined products, there will clearly be scope for further rationalization."
