Final Draft EnSys Energy & Systems, Inc. The U.S. West Coast operates in a relatively isolated manner from the rest of the U.S. Separated by the Rocky Mountains and long transportation distances, it is really more a part of the Pacific Basin market, whereas the other U.S. regions east of the Rockies function as part of the Atlantic Basin market. The West Coast (PADD V) region comprises 44 operable refineries with a combined capacity of 2.9 million bpd. California refineries, which dominate the region (at 1.9 million bpd), are subject to uniquely stringent environmental regulations governing both their product output and emissions. U.S. Refining capacity peaked in around 1981 at 3 million barrels per calendar year and since then has declined. Overall, U.S. refining capacity has altered little in absolute terms in the 20 years since 1974. As a percentage of the global total, U.S. capacity has declined moderately from 22% in 1974 to 20% in 1994. For Western Europe and for OECD as a whole, this decline has been much more marked, Western Europe's share dropping from 28.4% in 1974 to 19% in 1994 and OECD's from nearly two thirds at 63% in 1974 to just over half, 51%, in 1994. This decline in relative position has been a function of two main factors: first a drop of 5 million barrels per day in Western Europe's refining capacity through rationalization which continues today and, second, through continuing rapid growth in non-OECD regions of the world, especially in the Asia Pacific region, including China; also in the Middle East and to a lesser degree, Africa. Active refining capacity in Japan has remain relatively flat at 5 million barrels per day. Similarly capacity in Australasia has remained static at around 0.6 million barrels per day. Table C2 and Fig. C1 provide details. Final Draft EnSys Energy & Systems, Inc. C. 2. Trade Movements Table C.3 highlights how the OECD nations remain today the primary importers of petroleum. The U.S., Western Europe and Japan between them account for nearly 70% of total world petroleum imports. In contrast, the U.S. accounts for only 2.6% of world petroleum exports. Final Draft C. 3. Oil Demand and Refining Capacity Growth EnSys Energy & Systems, Inc. According to IEA projections, world oil demand is expected to rise at an annual average rate of 1.8% per annum through 2010. Within this overall total however, the demand for oil in the rest of the world outside OECD and former Soviet Union/Eastern Europe/China is expected to grow at an annual rate of 3.8 % per annum, considerably faster than the projected growth of 0.8% in the OECD. Source: EIA 1996 Annual Energy Outlook, Reference Case Forecast Again, there are contrasts as illustrated in Fig. C2, virtually all the growth in OECD demand is projected to be for transport fuels. Since transport fuels are lighter than crude oil, the implication is that OECD nations will continue to need to build more refinery upgrading capacity. Tightening fuel quality specifications in the U.S. and Europe will further expand this requirement for substantial investments in refinery secondary processing capability to produce high quality light products. In addition, a significant proportion of the incremental oil demand in the high growth non-OECD regions will also comprise gasoline, diesel, jet fuel i.e. light fuels. This requirement for continuing additions to refinery secondary processing capability as well as distillation capacity is illustrated by the year 2010 WORLD model case run by the authors against EIA 1995 Annual Energy Outlook projections. Relative to installed Jan. 1. 1995 global refinery capacity, this 2010 case indicated the need for substantial capacity additions including the following: primary upgrading processes (fluid cracking, hydrocracking, coking) 6.6 million barrels per day capacity desulfurization/deep hydrotreating of distillates, gas-oils and residua, 7.3 million barrels per day catalytic reforming and oxygenates production 1.7 million barrels per day |