LONDON (Dow Jones)
Refineries in Spain and Portugal are set to deliver nearly half of Europe's refining capacity growth in the next five years, the International Energy Agency said Tuesday.
"Spanish and Portuguese refineries are set to undergo a period of rapid change," the energy watchdog for the Organization for Economic Cooperation and Development said in its annual medium-term oil market outlook.
Current refinery investment in the countries aims to redress the supply shortfall of middle distillate products in the Iberian region, the IEA said.
"Net imports of diesel in the Iberian Peninsula have been increasing in recent years, as demand growth, averaging 5% over the last five years, has exceeded supply increases," the agency said. The Iberian peninsula accounts for the second-highest diesel imports after France.
A raft of new refinery projects are set to come online by 2013, geared toward producing more middle distillate products - gasoil, diesel and jet fuel.
Refiners in the region are also moving to boost complexity at their refineries - ensuring that their facilities can produce better-quality products which garner higher market prices.
"The increasingly tight product specifications for transportation fuels that are due to come into force in Europe will necessitate significant investment even to maintain the status quo of Spanish refineries' competitive position," the IEA said.
The new wave of investment reflects a shift away producing low-quality fuel oil, as stricter environmental regulations and poor economics deter investment in the product, the IEA said.
"The prospect of tighter fuel oil specifications being introduced, both for inland and international marine bunkers (shipping fuel) ... will require additional hydrotreating investment which offers little opportunity for a satisfactory return on investment at today's market prices," the agency said.
The following table lists key refinery projects in the Iberian Peninsula and their completion dates as estimated by the IEA.
TABLE OF IBERIAN REFINERY PROJECTS
COMPANY REFINERY UNIT ESTIMATED
Repsol Cartagena 110,000-b/d expansion 2011
Repsol Tarragona additional coking capacity 2013
Repsol Bilbao additional coking capacity 2013
BP Castellon 20,000-b/d coker early 2009
Cepsa Huelva additional hydrocracking end-2010
Cepsa Cadiz mild hydrocracking capacity end-2010
Galp Energia Porto visbreaker 2011
Galp Energia Sines hydrocracker 2011
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