Investments in heavy oil refining technology misplaced as global crude mix gets lighter
The growth of tight oil developments in North America could impact the global refining sector as new supplies of light and sweet crudes enter the market, according to UK-based consultancy Wood Mackenzie.
Downstream operators have heavily invested in technology to process heavy and sour crudes to prepare for conventional expansions, but non-conventional plays in the US are expanding capacity with the opposite specifications.
If youre a refiner, its a nightmare, said Alan Gelder, head of oil research at Wood Mackenzie, speaking at the KPMG GCC Energy Conference, held by the Netherlands-based firm in Abu Dhabi, on 1 October.
Youve invested billions of dollars on the basis that the global crude supply mix is going to get heavier and sourer, when in fact it is going to get lighter and sweeter, he added.
Tight oil developments will also impact crude exporters in the Middle East and the wider Opec producers, as global supply increases faster than demand.
Non-Opec growth will be faster in the period up to 2020 than global demand growth, in a large part due to tight oil developments in the US, said Gelder. This means Opecs spare capacity is going to grow.
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