S&P Global: Rapid set to boost Asia’s refining capacity growth
KUALA LUMPUR: With the startup of Petroliam Nasional Bhd’s (Petronas) Refinery and Petrochemical Integrated Development (Rapid) project in Pengerang around the corner, Asia’s refining capacity growth will experience a boost this year, says S&P Global Platts.
The start-up of the 300,000 barrels of refining capacity per day project will increase Saudi Arabia’s crude inflows into the region and add to the supply of refined petroleum products.
This will underscore the shift of global refining capacity growth to Asia where the bulk of the demand growth is concentrated.
The refinery in Johor has fired up its crude distillation unit and is expected to be ready for commercial operations by the fourth quarter of this year.
The facility would produce refined products, including petrol and diesel that meet Euro 5 fuel specifications, providing feedstock for the integrated petrochemicals complex with a capacity of 3.3 million tonnes per year.
S&P Global Platts, an energy and commodities information source, said while China continued to dominate Asian refining capacity growth, Southeast Asian capacity additions this year are significant, mainly from Rapid and Brunei’s Hengyi refinery in the second half of this year.
Hengyi has a capacity of refining 160,000 barrels per day.
S&P Global Platts in its latest Asia Pacific Oil Market Forecast report, said the project was designed to meet domestic fuel demand in Malaysia and export surplus volumes, although domestic fuel demand was likely to be affected by lukewarm economic growth.
“Rapid will add to refined product supply at a time when higher Chinese exports will add to Asia’s diesel surplus and pressure refinery margins, at least until the impact of the International Maritime Organisation 2020 regulations start to tighten the market,” said the firm.
Asian refining margins are expected to average US$4.40 (RM18.04) a barrel this year, up from US$3.30 a barrel last year, according to Platts Analytics, which expects Asian product markets to tighten in the second quarter due to heavier refinery turnarounds.
S&P Global said Rapid was also key to Saudi Arabian Co’s (Aramco) marketing strategy as it would supply half of the refinery’s crude feedstock, with the option of increasing it to 70 per cent while Petronas will supply the natural gas, power and other utilities needed to run the plant.
It noted that Aramco has been chasing markets in the East as key consumers like the United States boosted domestic production.
Touching on the crude distillation unit (CDU), the firm said global refiners will add 1.87 million barrels of CDU per day capacity this year, and the Asia-Pacific region would account for 61 per cent of those additions, taking total Asian CDU capacity to more than 37 million barrels per day by the end of this year.
As a result, Asia’s share of global CDU capacity was expected to rise to 37 per cent this year, said Platts Analytics.
The jointly held AramcoPetronas US$27-US$28 billion Pengerang Integrated Complex is preparing for the official startup of Rapid. Its mechanical completion was achieved on November 29 last year and all critical units under contractor Petrofac Ltd’s scope have now started commissioning activities in advance of the fire up of the refinery’s crude distillation unit later this month.
The delivery of the first cargo of two million barrels of crude supplied by Petronas and Aramco to the site was done in September last year, to be used for commissioning and testing activities at the refinery in October last year.