Energy Watch: Weak Financials Accelerate Structural Shifts in Global Refining from IOCs like BP, Total amp; Chevron to NOCs
Chronically weak financial performance in the refining sector is accelerating the shift in ownership away from Independent Oil Companies towards National Oil Companies as never before. For years, IOCs have been under pressure from their shareholders to improve returns in the downstream and the weak economic environment has exacerbated the pressures in recent years. Many NOCs, in contrast, have the flexibility to take a longer term, more strategic approach and are in fact doing so.
NOCs Dominate New Builds
Worldwide, Evaluate Energy has identified 7.5 million b/d of new refinery plant under construction worldwide, a further 3 million b/d at the design/engineering stage and an additional 4.7 million b/d that are still in the planning stage. Almost 50% of the newly planned refineries are the brainchilds of just 10 companies – all National oil companies or NOCs. (see Figure 1).
Unsurprisingly, Chinese companies Sinopec and PetroChina dominate the new projects, with plans for 1.5 and 1.3 million b/d of new capacity respectively, boosting their capacity by 40% over the next 5 years. Less than half of these plants are currently under construction, raising doubts as to whether Chinese capacity increases will keep pace with internal growth for refined...