Thursday 28 Mar 2024
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KUALA LUMPUR: The current weak crude oil prices have curbed refinery capacity expansion globally which bodes well for existing players in the form of wider profit margins.

Dr Jeff Brown from FGE Ltd told the audience during a session at the 18th Asia Oil & Gas Conference yesterday that many mega projects are mostly complete and the only next big-scale refinery that would be up and running will be in the Middle East in 2018 or 2019.

“We have a gap there where there are no large projects in the picture. I think the delays and shutdowns come from a combo of companies that are going under pressure,” said Brown, adding that on a brighter note there is still demand for refined products in the global market.

“One thing that is good is that demand has picked up with lower oil prices,” he said noting that this is good news for the industry.

He added that another bit of good news is coming from China — the country has stopped pushing to build new refineries.

Brown noted that more than a year ago, China had been building new refineries to increase refining capacity. “But of course when we look at refineries we are curious to look at where the margins are okay,” he said.

He added that when it comes to refining margins across time, there have been outages and there are the occasional spikes which will see refiners making more returns from their operations.

“When those spikes go higher it is good news and this time from what we are seeing, it will last a little longer,” he said, foreseeing better margins in the near term for refiners across nations.

However, Brown noted that the industry will not be seeing the same high margins it had seen before the 2008-2009 global recession. “But the downstream industry does certainly look better”.

He also noted that even though oil prices are cheaper and margins have become better, it does not translate to prices seen at petrol stations as some countries have been facing a decline in their respective currencies.

 

This article first appeared in The Edge Financial Daily, on May 20, 2015.

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