Purvin & Gertz recently released its global petroleum market outlook for 2011. The study provides an analysis of global and regional markets for crude oil and refined products within a framework of world energy demand and economic activity through 2030. The conclusion of the report is that a global economic recovery is well underway, but there are new areas of uncertainty to consider. Political turmoil in the Middle East and North Africa has appeared in the first few months of 2011 and has caused some oil supply disruptions. A massive earthquake and tsunami devastated northeastern Japan, inflicting painful loss of life and serious damage to nuclear power capacity and other energy infrastructure such as refineries and LNG receiving terminals. These negative factors are counterbalanced somewhat by the return of economic growth in many of the worlds economies and by accelerating crude oil supply in countries outside of OPEC.
Key conclusions of this years analysis include:
Refined product demand increased by 2 million bpd in 2010 as most economies emerged from the 2009 recession. Demand growth was strongest in Asia, the Middle East and parts of Latin America. The companys long-term forecast for refined product-demand growth has been updated to reflect the impact of higher long-term crude oil prices and more stringent conservation efforts. The challenge to supply energy to a growing global population of expanding financial means is huge.
Product demand in non-OECD countries will grow rapidly from the current level of 37.3 million bpd in 2010 to 59.6 million bpd in 2030. Of the expected 22.3 million-bpd increase, China alone is expected to account for 43% of this increase. The combination of Brazil, India, Russia and the broader Middle East will account for almost 30% of the increase.
Diesel fuel will increase its share of total demand as demand for other fuels grows at a slower pace. Gasolines share of demand has been relatively stable for the last 20 years, but is expected to drop in the OECD countries as higher vehicle efficiency standards propagate through the fleet. However, gasoline demand will still continue to grow in many developing countries.
Residual fuel oils share of demand will decline over the next 10 years as competition with natural gas intensifies in some regions and bunker fuel specifications favor a shift to marine diesel by 2015.
Despite the large refined product demand increase seen in 2010, a significant oversupply situation currently exists. The requirement to blend increasing volumes of ethanol and biodiesel into products is further adding to the product oversupply situation in the Atlantic Basin. A few weaker refineries have already shut down and more closures are expected. However, the survivors in some markets will have to operate at significantly lower rates until after 2015 unless further capacity rationalization corrects the capacity imbalance.
Light/heavy price differentials and returns on capital investment declined rapidly in early 2009 as the global economy slowed. A modest recovery in conversion returns was experienced in 2010, but conversion returns are expected to weaken because new capacity will continue to come online in the next few years.
Worldwide refinery investments to 2020 are expected to cost approximately $275 billion which represents 18% of 2010 replacement costs. Additional investments in the range of $145 billion are expected through 2030. HP