Projections that Nigeria will begin to export refined petroleum products by 2016 may not materialize after all, as the International Energy Agency, IEA, yesterday, said it expects a significant increase in oil processing with the coming on stream of new refineries in Asia and Middle East.

The IEA in its monthly report said it expects 9.5 million barrels per day of new crude distillation capacity, representing more than a 10th of global demand, to come on stream between 2013 and 2018, forcing less advanced competitors in developed countries, including Nigeria, to close.

It maintained that shorter-than-expected crude supply and large refining volumes would undermine refining margins, making it difficult for marginal players to break even.

The 9.5 million barrels refining capacity, the IEA said is substantially more than the forecast increase in crude production capacity and global demand growth.

According to the IEA, the changes would be already felt from the third quarter of 2013 as global refinery runs may rise by more than two million barrels per day on the back of increased processing by China, Saudi Arabia and Venezuela.

It added that the spike in crude runs would exceed forecast product demand growth of 1.7 million barrels per day.

The IEA said, “While Europe’s economic woes are taking a toll on demand, there are mounting signs that China’s oil use, like its economy, may have shifted to a lower gear. Slower growth in demand than in runs could lead to product stock builds.”

The IEA further stated that global crude supply could struggle to keep up with refining demand due to a number of factors, ranging from seasonal maintenance to North Sea production, Sudan’s struggle to resume production, the annual hurricane season in the United States Gulf and risks to Middle Eastern output due to the Syrian civil war.

It said, “While that would normally prompt refiners to drop their throughputs, market participants may not be equally receptive to such price signals. New refining capacity would likely be the last to cut back on runs if refining economics turned south.

“On the other hand, older plants in mature markets, saddled with comparatively high costs, might feel the heat. That those plants should find it increasingly tough to compete is a widely anticipated outcome of the current downstream restructuring.”

Babatunde Ogun, President, Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, had last year projected that Nigeria will begin the exportation of refined petroleum products by 2016.

According to him, if the refineries are upgraded, the country’s yield will increase and would get more petrol instead of the kerosene.

He said, “If the new two refineries we are expecting come in, by that time we should be talking of exportation and in the next four years we should be exporting refined products.”

 Information from Vanguard was used in this report.