VERONA, Italy -- Further refinery
closures are needed if
the global refining
sector hopes to keep its
utilization rates above 80%, according to the CEO and
president of Kuwait Petroleum International.
Bakheet Al-Rashidi, who delivered Thursday's keynote address
at the International Refining
says that based on current capacity and planned expansion
s, global utilization
rates are set to fall to about 79% by 2015.
"To bring utilization rates back up to a healthy 82% will
require closure of around 7 million bpd of capacity by 2015,"
Al-Rashidi said. Of that 7 million bpd of needed closures,
about 2 million bpd is already confirmed, he said.
Global operating rates were as high as 87% in the mid-2000s.
But when the global economic downturn hit in 2008, rates
plunged as low as 80% in 2009 before moving up incrementally
in recent years. But without further refining
closures, the downward
trend could resume in 2015.
"This may not be feasible on a sustainable basis," said
Al-Rashidi, speaking of the current capacity scenario.
The Kuwait Petroleum executive says he expects an additional
3.8 million bpd of refinery
closures by mid-2015,
mainly in Europe
, parts of Asia and
Australia due to weaker margins, aging facilities
, new environment
al regulations and high
Looking beyond the next year, he says the future focus of the
sector will be on clean
s production. In terms of capacity expansion
s, China should lead the
way with an additional 7.5 million bpd of production by 2020,
while the Middle East is likely to raise its capacity to 11.4
million bpd from 7.9 million bpd at present.
s, of course, could put
even more pressure on less-competitive refiners to close.
"Smaller and uneconomical refineries are having to shut
down," Al-Rashidi said.
Al-Rashidi called on Europe
an refiners to study several
options for staying in business. Those include
to increase utilization, improve
yields and reduce costs; improving
operational excellence, optimization and integration
unprofitable assets to maximize
return on investment and reduce risks; and
unprofitable assets and converting
them to other uses, such as a terminal.