The oil refining industry is at a critical juncture. Between 2005 and 2008, the industry witnessed capacity tightness and product quality challenges in the face of increasing demand. For many years, the focus of the oil industry has been on crude oil production, but the inadequacy of refining capacity has become the top industry concern.

Global Markets Directs new report "The Future of the Global Refining Industry to 2013" gives an in-depth analysis and identifies the various concerns, shifting trends and prospects in the global refining industry. This will support investment decisions in the oil refining business globally with information on refined products demand-supply scenarios, available refining capacities, gross refining margins, profiles of major refining companies and an analysis of the competitive scenario in each market.

The Global Spare Refining Capacity or Capacity Cushion Will Remain Marginal

The global refining capacity cushion will continue to remain low in the next five years. Spare capacity, which was as high as 25% in the early 1980s, has declined to 6%-7% in recent years. This capacity shortage encouraged new investments in the refining sector and several new refinery projects have been announced across the globe. The announced projects, if realized, would create a capacity cushion of around 20%. However, many of these projects are getting delayed or cancelled due to high construction costs and the global financial meltdown. In such a scenario, the global refining capacity cushion will remain low beyond 2013.

National Oil Companies (NOCs) Will Drive Investments in the Refining Industry

In the next few years, governments will drive refining capacity growth through NOCs while poor market conditions will reduce private company investments. The global refining industry has traditionally been dominated by private, independent oil companies (IOCs). Even after nationalization of the oil industry in many countries, these companies maintained their dominance by capitalizing on their technological competence. Many countries, especially countries in Asia and the Middle East, have specific national priorities for pursuing refining projects. Such national objectives are being met through NOCs in these countries.

The Middle East, China and India Will Witness the Rise of New Refining Hubs

In the next few years, the Middle-East, China and India will witness major refining capacity expansions. These three markets constitute nearly 8 Million Barrels per day of planned projects. While new refineries in China will cater mainly to domestic demand, Middle-East and India plan to transform themselves into major refining and petroleum product exporting hubs.

Global Refining Margins Will Remain Low

Refining as a business has been a low margin business for several decades and this is likely to persist. Although the industry had started witnessing higher returns since 2004, the recent economic meltdown across the globe has again transformed it to its traditional model of a high-investment, low-return business. As the demand for products like gasoline and naphtha are unlikely to recover in the coming years, global refining margins will remain low and will be sustained mainly by middle distillates, which will have steady demand.