Page 10 - DMEA Week 44

DMEA reFininG DMEA
sector’s fuel mix.” However, there will be a signif- icant impact on fuel oil prices, though this will be “less severe than previously expected”.
The outlook’s findings on refining were par- ticularly notable.
It said that amid a surplus of around 4mn barrels per day of refining capacity, OPEC antic- ipates the closure of 2.1mn bpd of throughput globally by 2024, with another 5mn bpd of clo- sures by 2040.
It added that during the period to 2024, around 7.95mn bpd of new crude distillation
capacity will come onstream, with more than two thirds of this being added in the Middle East and asia. This, OPEC said, would mean that “excess supply of refining capacity will nec- essarily lead to increasing competition in the downstream market and, consequently, to refin- ery closures ... [and] it will become increasingly difficult to justify building large new refineries.”
The report noted that total exports from the Middle East are anticipated to grow by around 7mn bpd between 2025 and 2040 to reach around 23mn bpd.™
FUels
South Korea’s oil and gas demand declines
middle east
sOuTH Korea’s oil and gas demand is in decline, with the country re-embracing nuclear and coal in the power sector while introducing policy measures curbing demand for transportation fuels. Middle Eastern producers will be looking on intently, with the country’s gasoil consump- tion shrinking by 20% year on year in september to 10.86mn barrels, s&P Global Platts reported this week citing state-owned Korea National Oil Corp. (KNOC) data. This was, the news service noted, the sharpest contraction in demand since consumption dropped 25.8% y/y in June 2008. Gasoline demand, meanwhile, slid 15.8% y/y to 5.76mn barrels.
Tougher environmental regulations, such as banning older diesel-fuelled trucks from city centres, will hurt gasoil demand going forward. Higher retail gasoline prices following seoul’s move to scrap tax cuts for transportation fuels on september 1 have also deterred shoppers and are likely to continue doing so.
Furthermore, the country’s slowing eco- nomic growth, which the International Mon- etary Fund (IMF) has revised to 2% for this year from its previous outlook of 2.6%, will also squeeze demand for auto fuels.
at the same time, south Korean demand for LNG is projected to contract over the next
five years. While demand hit an all-time high of 44mn tonnes in 2018, Reuters reported this week that analysts anticipated a dip in the years ahead as new nuclear and coal-fired power generation comes online.
One nuclear reactor came online in august, another is due to start up this year and three more are due online by 2024, Reuters said citing data from Korea Power Exchange. The newswire added that seven large coal-fired power plants were set to start operations by 2022.
Nuclear reactors accounted for 27.4% of the country’s power generation in the first eight months of the year, up from 22.3% a year ago, Reuters said citing data from Korea Electric Power. Gas power generation eased from 27.6% to 25.1% in the same timeframe.
Changing power supply patterns have already seen LNG imports fall 8.3% y/y to 29mn tonnes, according to customs data. Energy consultancy Wood Mackenzie, meanwhile, predicts a 9% drop in the country’s full year imports.
“as we move through the early 2020s, LNG will come under pressure in the power sec- tor as new coal-fired power capacity starts up and imports will fall towards 36mn tonnes per annum,” senior Wood Mackenzie analyst Lucy Cullen said.™
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w w w . N E W S B A S E . c o m Week 44 07•November•2019