Current wave of refinery capacity growth 'likely to be the last': IEA

The current wave of refinery capacity expansion -- which will see around 6 million b/d added to global capacity -- is likely to be the last, according to the International Energy Agency, as it forecasts post-2030 capacity growth to recede in all its scenarios.

In its latest World Energy Outlook Report released Oct. 24, the IEA forecasts that based on existing policies global refining capacity will climb from 102.7 million b/d in 2022 to 105.2 million b/d in 2030, led by new developments in Asia and the Middle East, and inch up slightly to 105.8 million b/d in 2050.

In a more ambitious energy transition scenario, where all countries meet aspirational emissions reductions pledges on time, total capacity is expected to drop 3% by 2030 from 2022 levels to 99.4 million b/d, and a further 24% to 62.9 million b/d by 2050.

Speaking in a webinar Oct. 24, the IEA's Executive Director Fatih Birol was careful to differentiate between the different global consumers when considering demand projections for 2030. "This doesn't mean all countries of the world will see fossil fuels peak," he said. "Several developing countries will see continued increases."

One country expected to grow its refining sector is India, where capacity is expected to rise from 5.2 million b/d in 2022 to 7.5 million b/d by 2050 under existing government policies.

The IEA report highlighted a growing chasm between refining capacity forecasts based on existing policy measures and aspirational emissions reductions targets, particularly for Europe and North America. Under the existing policy measures scenario, the IEA expects North American refining capacity to drop just 1.4% between 2022 and 2030, from 21.3 million b/d to 21.0 million b/d, and for 2050 to represent a 2.8% decline on 2022 levels.

Should North America meet its emission reduction aims, however, capacity will need to drop 7.5% compared with 2022 levels by 2030, and by 55% by 2050 to reach 9.6 million b/d.

The IEA said the projected demand declines undercut the rationale for increased investment in the oil and gas sector. Speaking in the Oct. 24 webinar, Tim Gould, the IEA's Chief Energy Economist, advocated for "continued investments in existing fields, but no new long lead time investments."

EV gains

The IEA cited falling transport fuel demand and surging electric vehicle (EV) uptake as a key driver for declining investment in refining capacity.

According to the IEA, sales of gasoline and diesel cars peaked in 2017-2019, and EVs are expected to account for 18% of the total car sales in 2023.

In its report, the IEA said that the leading role of transport fuels in driving oil demand growth over the past few decades was coming to an end.

In 2050, gasoline's share of total oil demand is set to drop from 25% (24 million b/d) in 2022 to 17% (16.3 million m/d) based on existing government policies, and 14% (7.4 million b/d) based on aspirational emissions targets. Gasoline demand will need to approach zero for the world to achieve net-zero emissions, according to the IEA.

Resilient petchems, aviation demand

Meanwhile, global demand for naphtha -- one of the most important petrochemical feedstocks -- is expected to remain steady at 6.9 million b/d between 2022 and 2030 under the stated policies scenario, rising to 8.4 million in b/d in 2050, the IEA said. Under the announced pledges scenario, it eases to 6.4 million b/d in 2030, before edging back up to 6.9 million b/d in 2050.

"There are plans to restrict or ban the production and utilization of single-use plastics and to scale up plastics recycling, but these do not prevent an overall increase in global demand for plastics," according to the IEA.

The IEA also forecast kerosene demand to rise from 6.2 million b/d in 2022 to 11.1 million b/d in 2050 under current policies, and to 6.7 million b/d even when aspirational targets are met.

"The use of sustainable aviation fuels increases, but oil use for aviation nevertheless grows to the mid‑2030s and then only declines slowly," the IEA said.