Bid & Tender
TEI - Energy Outlook

Downstream Delays
 

The refining sector in the Middle East and North Africa (MENA) has slowed in 2016 after enjoying an unprecedented success over the past couple of years. State of uncertainty with the drop in global crude prices has knocked down the downstream construction activity lately.
 

The Middle East region has increased the refining capacity by about 20% in past three years mainly to meet the growing in-region demand, which has been increased by almost 50% since 2004. Additional 5 million barrels per day (mbpd) of capacity is being planned over the next five years to serve export market as well.
 

The region has awarded an average of $12 billion contracts annually in the downstream sector since 2010. Kuwait has made a significant progress by awarding contracts for its two huge refinery schemes with a combined worth of $31.8 billion – Clean Fuels Project and Al-Zour refinery project.
 

The new refineries in the region will produce a variety of oil products including gasoline and jet fuel, with diesel comprising more than half the output. The International Energy Agency forecasts that ME could have surplus diesel and jet fuel available for export amounting to 1 mbpd by 2019.
 

However, the crude downturn is having an impact on this year’s projects budget. Although there are a number of benefits of downstream projects including diversification and increasing employment, low oil price environment and budgetary pressures has curbed spending plans on refinery schemes. There is no dearth of ongoing mega downstream projects, but many have been pushed back or put on hold. Only essential projects seem to be moving forward.
 

Currently, over $70 billion of downstream projects are stuck in the pre-execution stages in the Mena region. Some major refinery programmes that have faced significant delays under the current scenario are Iraq’s new refinery schemes at Nasiriyah, Missan, Kirkuk and Qayyarah, Ipic’s new refinery project in Fujairah, UAE, Algeria’s refinery projects and Oman’s Duqm refinery.
 

As an outcome of the deferred investment decisions, the export-based refineries are likely to take a back seat and those being built to meet domestic fuel demand would be preferred in the foreseeable future.


Pallavi Agrawal

Editor