After two years of cuts in upstream capital expenditures, the global downstream sector is also now being forced to lower its expenditures, reducing the outlook for global refining capacity.
The collapse in oil prices offered relief to the downstream market as their main input became less costly and demand rose, particularly in 2015. But since then, demand growth has been insufficient in meeting the high capacity in the system, straining downstream margins and causing investors to defer some refining projects.
Downstream capacity has been increasing steadily since 2010 in the Middle East, thanks to rising domestic demand and the progressive moves to increase exports.
Rising demand domestically, as well as an expanding export sector directed toward Asia, will be the main driver. There are also a number of megaprojects, which will greatly boost the distillation capacity.
As much-needed investments in the oil and gas sector pick up this year and beyond, alongside prices, there is a more positive outlook for the downstream sector. The Middle East is expected to be the fastest growing region in terms of refining capacity in the coming 5-10 years.
Check out the following video to know what Ekaterina Kalinenko, project director, Euro Petroleum Consultants, has to say about the future of the downstream industry in the Middle East.