Construction Trends

The 10 Largest-Capacity Refineries in the World

Posted May 3, 2017 by Silvia Zurita in Business, Business Valuation, Commercial, Construction, Construction News, Downstream, Energy, Engineering, Financial, Infrastructure, Midstream, Natural Gas, Oil, Petrochemical, Pipeline, Valuation


Refinery construction is primarily driven by demand for oil products. “Demand growth for oil products is currently strong and will remain so for at least this year and next,” says Richard Joswick, managing director of PIRA Oil Group at Platts. “Over the medium term, although we think it will slow somewhat, it will still remain quite healthy. We do not see any ‘peak demand’ for oil any time soon.”

“Global refined-product demand is expected to grow by about one million barrels per day per year for the next decade, and that growth will require refinery capacity expansion,” says Rebecca Adler, senior director of communications at the American Fuel and Petrochemical Manufacturers.

“There’s a need, long term, for new refineries globally,” adds Joswick. “We’ve seen a lot of refinery growth in rapidly developing countries—in the Middle East, India and China. We’ve seen incremental growth in the U.S., where there are de-bottlenecking projects, because demand is still growing. Refinery margins were very good in 2015, good in 2016 and are good now.”

A similar perspective is provided by Jacobs, which does extensive, ongoing refinery work for major clients. “We expect the best markets for refineries to be in non-OECD [Organisation for Economic Co-operation and Development] countries, specifically those in Southeast Asia, as they move away from imports and toward self-reliance in transport fuels,” says Shaun Boardman, vice president of technology at Jacobs Petroleum & Chemicals.

Joswick sketched out the cyclical nature of the refinery market, with its high cost of entry, high capital costs and long lead times. “We’re now in a place where refinery capacity growth has come down. Growth in 2017, 2018 and 2019 will be less than in the past five years, since margins were poor when these current projects were commissioned. There are good margins now,” he says. “I expect we’ll see a construction surge starting in 2019. Refineries are always five years behind the times because it takes five years to go from concept to planning to design to permitting to construction and startup to commercial operation.”

Another factor influencing refinery construction is an upcoming global specification change for bunker fuel, which takes effect on Jan. 1, 2020. The global sulfur cap of 0.5% was promulgated by MARPOL Annex VI, an international marine-pollution convention. Representing over 90% of global trade, 88 countries have agreed to the cap. “Three million barrels per day of refinery output of bunker fuel will have to switch from high sulfur to low sulfur,” explains Joswick.  “There’s no easy way to do that—only expensive ways. Refiners that have coking capacity will make a huge amount of money. Other refiners will hurt. This will cause a scramble for the kinds of units that will produce low-sulfur bunker fuels—coking and hydrocracking units. I would expect to see a spurt in construction to meet that demand.”

The Al Zour Refinery, in Kuwait, is the largest greenfield refinery being built anywhere in the world; it is expected to have a capacity of 615,000 barrels per day. The estimated construction cost is $16 billion, and it will more than double the country’s processing capacity when completed in 2019. So far, the Kuwait National Petroleum Co. has awarded $12.8 billion in five packages.

The first contract, worth $4.2 billion, was awarded to Technicas, Hanwha Engineering & Construction Corp. and China Petroleum & Chemical Corp., known as Sinopec. The second and third packages, worth $5.7 billion, were awarded to Fluor Corp., Daewoo and Hyundai Heavy Industries Co. According to Fluor’s Jim Brittain, the joint venture they are leading on those two packages “is using a modular execution approach, with peak labor on site expected to be around 17,000 people.”

The fourth package, worth $1.55 billion, was given to Saipem SpA and Essar Oil Ltd., and the fifth package, worth $1.48 billion, was awarded to Hyundai Engineering & Construction Co., Saipem and SK Holdings Co. Ltd. It will process heavy crude from Kuwait into low-sulfur diesel, high-value light products and fuel oil to feed power plants within Kuwait.

Nigeria is taking a huge economic leap, as the large cement manufacturer Dangote Group is developing a $12-billion greenfield refinery, near Lagos. Engineers India Ltd. is performing engineering, procurement and construction management for the refinery and an associated polypropylene plant. The project will include a crude distillation unit, a single-train residual fluid catalytic cracking unit and a diesel hydrotreating unit. When the plant begins operating in 2019, it will have a capacity of 650,000 bpd.


To read full article and view gallery of refineries, click here.