Predictions of peak oil and the impending demise of fossil fuels will hit Asian oil refiners especially hard. The region is home to three of the top four oil-guzzling nations, and more than a third of global crude processing capacity. Yet, Asian refiners are expanding at a breakneck pace, even building massive new plants designed to run for at least half a century. What is going on?
After a century of powering the world’s vehicles, oil refiners are having to plan for an oil-free future in mobility as cars begin switching to batteries, ships burn natural gas, and innovation brings on other energy sources such as hydrogen. Goldman Sachs Group Inc. predicts oil demand for transportation will peak as early as 2026.
Yet, even as a slew of headlines announce oil major BP Plc selling its prized Alaskan fields or Royal Dutch Shell Plc pulling the plug on refineries from Louisiana to the Philippines, Asia’s big refineries are planning for a much longer transition. Chinese refining capacity has nearly tripled since the turn of the millennium, and the nation will end more than a century of U.S. dominance this year. And China’s capacity will continue climbing – to about 20 million barrels a day by 2025, from 17.4 million barrels at the end of 2020. India’s processing is also rising rapidly and could jump by more than half to 8 million barrels a day in the same time.
“Asia is going to be the center of global activity and hence the choices that are being made in Asia about pioneering cleaner technology development, or not, are very important,” said Jeremy Bentham, vice president of global business environment at Royal Dutch Shell Group. “Economic development is going to be very Asian centered, hence the consumption of energy will be very Asian centered and hence then the opportunity to take a lead in deploying clean technologies is there.”
“Energy transition is happening in many ways already,” said Sushant Gupta, research director for Asia Pacific refining and oil markets at Wood Mackenzie. “But in Asia, over the next two decades, we still see transport fuel demand. It will be slower, but will still be there.”
Here, then, is a roadmap for Asian oil refiners to make it to 2100 by adapting their businesses in stages.