December 2015

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HP Editorial Comment: The global downstream construction boom will continue

As we have seen over the past year and a half, low oil prices have spurred global consumption.

Nichols, Lee, Hydrocarbon Processing Staff

As we have seen over the past year and a half, low oil prices have spurred global consumption. Downstream companies have witnessed margins not seen in years. Demand for petrochemicals and oil-based products are forecasted to continue to grow through the rest of the decade, especially in emerging economies in Asia and the Middle East.

The hydrocarbon processing industry (HPI) continues to expand to meet this increasing demand for energy, transportation fuels and petrochemical-based consumer products. As confirmed by Hydrocarbon Processing’s HPI Market Data 2016 forecast, over $1.5 T in downstream projects are presently active in the refining, gas processing/LNG and petrochemical industries. According to Hydrocarbon Processing’s Construction Boxscore Database, over 2,500 active projects are in some phase along the project’s planning, engineering or construction time frame. Nearly 60% of active projects are in the preconstruction phase.

In the refining sector, new technologies are moving the industry toward cleaner, low-sulfur fuels for transportation, and the scenario of low oil prices and high demand has boosted refining margins. Light- and middle-distillate demand will continue to rise through 2020, and the global refining industry is investing hundreds of billions of dollars in new capacity to meet this challenge. By the end of the decade, an additional 5 MMbpd to 6 MMbpd of new refining capacity will begin operations. The International Energy Agency (IEA) has forecast global crude distillation capacity to surpass 102 MMbpd by 2021. The Boxscore Database is tracking nearly 800 active refining projects around the world. This equates to nearly $650 B in total capital expenditures.

The global petrochemical industry will continue to grow through the end of the decade, as well. The global chemical sector will witness continued growth in developing countries in the Asia-Pacific and Middle East regions. These regions are investing heavily in petrochemical production units to supply increasing demand, as well as to diversify product portfolios. Some of the strongest growth is seen in the US, where cheap natural gas is fueling over $135 B in new petrochemical capacity. This includes the announcement of nearly 18 MMtpy of additional ethylene capacity, 17 MMtpy of new methanol capacity, 4 MMtpy of new propylene capacity and nearly $11 B in new ammonia/urea plant construction.

The world continues to watch natural gas become the fastest-growing fossil fuel. Growth on both the supply and demand sides has resulted in the announcements of billions of dollars of capital investment globally. The IEA forecasts world gas demand to increase from 123 Tcf in 2014 to nearly 140 Tcf in 2020. The power and industrial sectors will account for the majority of increased demand. To decrease carbon emissions, nations are increasing natural gas use to replace coal in power generation. These investments include the construction of LNG import and export terminals, cryogenic and gas processing plants, fractionators, pipelines and storage facilities, as well as large capital infusions in the exploration and production sector. According to BG Group, LNG demand will nearly double from 240 MMtpy in 2014 to 420 MMtpy by 2025. New LNG capacity is expected to reach over 425 MMtpy by 2020. The majority of this new capacity will be from Australia’s massive LNG export terminal buildout, as well as from new LNG export players such as the US.

As with any industry, the future is unknown. Major events can cause unforeseen shifts in industrial progress or decline. Nowhere is this more apparent than what the oil and gas industry has witnessed in the past two years. As low oil prices have spurred consumption, the future of the downstream industry remains bright. HP

Related Events
Energy Construction Forum – March 1-2, 2016 in Galveston, Texas

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