The Middle East is adding 2 million barrels a day (b/d) of refining capacity between 2016 and 2022, as the region looks to generate more value from its crude oil.

With growing demand from Asia, driven by the growth of China and India, refiners in the Gulf are looking to generate more value from every barrel of oil.

Oman, which has also embarked on a robust downstream strategy, recently completed its Sohar refinery improvement, raising the refining capacity of its northern refinery to 220,000 b/d.

The main engineering, procurement and construction contracts for its massive 230,000-b/d Duqm refinery project have been awarded and the scheme is set for financial close this November.

Oman’s strategic location and plans for developing its port cities, particularly to serve refining needs, are inviting more interest from product-hungry countries such as China and India.

A consortium of Chinese firms has plans to develop a refinery at Duqm with the same capacity as the Duqm refinery. MEED understands that Oman Wanfang, which is undertaking a study on the refinery scheme, has the finance and willingness to develop the project upon receiving approval from Omani authorities. It is also speculated that China may be interested in developing the refinery to process crude sourced from Nigeria for its own domestic consumption.

An Indian firm also announced plans last year to develop a bio-refinery at Duqm.

On the other side of the Gulf, Iran is negotiating with South Korean and Japanese firms to upgrade ageing refineries and also to build the 480,000-b/d greenfield refinery complex at Siraf, which will receive feedstock from the 13th and 19th phases of the offshore South Pars gas field.

There has also been speculation that Iran, should it include Indian developer ONGC Videsh in the development of the offshore Farzad B gas field, would look to develop a petrochemicals complex to utilise the gas as a feedstock. The project has stalled as Iran is considering India’s $11bn proposal as well as looking at working with Russian firms to develop this technically complex gas field bordering Saudi Arabia.

However, the concern for developers on both sides of the Gulf is reaching financial arrangements, particularly at a time of low liquidity in the region.

Oman, whose credit rating has taken a beating since the slide in oil prices, has been considering engaging more Asian partners in its downstream strategy.

Duqm Refinery has been in talks with a South Korean firm to potentially take a stake as a third partner on the project.

Perhaps the way forward for these schemes to see the light of day is to develop them in joint ventures with Asian countries, who would be the end users of refined products.