CHICAGO - Exxon Mobil, the world's biggest oil refiner and rivals such as Saudi Aramco and Total plan at least US$11 billion ($14.83 billion) of refinery additions as worldwide demand pushes up gasoline prices.
The projects include a US$4.3 billion refinery and chemical plant on Saudi Arabia's Red Sea coast
by Saudi Aramco and Sumitomo.
Exxon Mobil, Aramco and China Petroleum & Chemical, China's largest refiner, are spending US$3.5 billion to triple the size of an oil refinery and build a chemical plant in Fujian province.
The expansion, following two decades of reduced spending because of low prices that cut profits, reflects surging demand that is increasing the cost of gasoline, diesel, jet fuel and heating oil. Gasoline futures, which are based on wholesale prices, rose 3.8 per cent last week to US$1.5755 a gallon in New York, the highest since they began trading in 1984.
Refining "was for so long a poor business," said Mark Baxter, director of the Maguire Energy Institute at Southern Methodist University in Dallas, who was an engineer at Marathon Oil for 28 years. "There's a dire need for expansion."
Fuel prices have increased more than the cost of the crude oil from which they are derived, making oil company refinery profits grow faster than profits from producing and selling oil and gas.
The average US retail gasoline price reached a record of US$2.061 a gallon on March 18, up 16USc in a month according to AAA (formerly the American Automobile Association).
Prices at the pump will average US$2.15 a gallon from April through to September, when warm weather and summer vacations usually push US demand to a peak, the US Energy Department forecast this month.
"Prices for gasoline at the pump are being dragged up by demand and a lack of refining capacity in the US and worldwide to meet that demand," Baxter said.
High fuel prices contributed to US$9.18 billion in losses last year for the 10 biggest US airlines and prompted Texas-based Burlington Northern Santa Fe and other railways to impose surcharges to cover higher diesel costs.
The US$11 billion of new refinery projects, announced by oil companies during the past 10 months, will be spread out over the next six years. They are in addition to continuing spending on repairs and expansions, which was $11.9 billion last year among the seven largest publicly traded oil companies.
Global demand for gasoline, diesel and other fuels derived from oil is expected to jump 69 per cent by 2025 to 142 million barrels a day, according to the Energy Department.
"The world is now running at full capacity," said Ann Kohler at Independent Research Group in New York.
- BLOOMBERG
CHICAGO - Exxon Mobil, the world's biggest oil refiner and rivals such as Saudi Aramco and Total plan at least US$11 billion ($14.83 billion) of refinery additions as worldwide demand pushes up gasoline prices.
The projects include a US$4.3 billion refinery and chemical plant on Saudi Arabia's Red Sea coast
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