About 80pc of global refining capacity expansion will take place in China and Middle East in next 5 years
Growth of refining capacity in the Middle East, further from established demand centers, could support the product tanker market because more refined products cargoes need to be transported, and at longer distances.
"New refinery projects coming on stream in the Middle East exceed regional demand growth, resulting in increased product exports, particularly middle distillates", the company said in a presentation given at the Bank of America Merrill Lynch 2017 Transportation Conference and released by Scorpio.
Through 2020, the Middle East is expected to add 1.9mn b/d of capacity, followed by China's 2.2mn b/d, the company said. The former Soviet Union (FSU) region, Europe, North America, and South America round out the bottom of the list, increasing refining capacity by only 263,000 b/d, 200,000 b/d, 233,000 b/d, and 73,000 b/d, respectively.
Oman's Sohar refinery, where capacity will rise to 198,000 b/d, is the next major facility scheduled to begin operations, the company said. Other regional refineries that are scheduled to start up or complete upgrades this year are Iran's Persian Gulf Star 1, Qatar's Ras Laffan 2, and Saudi Arabia's Rabigh 2, the company said.
In a hypothetical scenario in which these and other projects in the region added 500,000 b/d to the Middle East to Asia-Pacific products route, Scorpio estimated that 40 new 600,000 bl capacity Long Range (LR1) vessels – the equivalent of 96 Medium Range (MR) tankers – would need to be added to the global fleet to service that trade.