Arab refineries have boosted production by nearly 633,000 barrels per day (bpd) over the past four years as they are pushing ahead with projects to expand capacity to meet growing domestic consumption and external demand.
Official figures showed nearly 40 per cent of the increase was in conflict-battered Iraq while there was growth in output in the UAE, Kuwait and Qatar. Production in most other members remained unchanged.
From around 7.2mn bpd at the end of 2006, the combined Arab refining production swelled to nearly 7.833mn bpd at the end of 2010, showed the figures by the 10-nation Organization of Arab Petroleum Exporting Countries.
Iraq's refining capacity surged from around 597,000 bpd at the end of 2006 to nearly 846,000 bpd at the end of 2010 while Qatar's output more than doubled from 137,000 bpd to about 283,000 bpd in the same period.
Kuwait recorded the third largest increase, with its refining output growing from 889,900 bpd to 936,000 bpd. Refining capacity in the UAE rose from around 778,000 bpd to 798,000 bpd while Saudi Arabia's production, which accounts for more than a quarter of the total Arab capacity, remained at 2.095mn bpd.
Refineries in Bahrain, which is not an oil exporter, boosted output slightly from 249,000 bpd to 262,000 bpd while production in Algeria rose from 450,000 bpd to 463,000 bpd. Production in other regional nations remained unchanged.
The report showed refining capacity in the region is set to rise sharply in the next few years as many of them are pursuing projects to expand existing units and build new refineries mainly to face a steady rise in domestic demand.
At present, Iraq has the largest number of refineries, standing at 10 at the end of 2010. Refining units were put at eight in Egypt, seven in Saudi Arabia, five each in the UAE, Algeria and Libya, three each in Kuwait and Sudan, two each in Oman, Yemen, Syria and Morocco, and one each in Bahrain, Tunisia, Jordan and Mauritania, according to the Kuwaiti-based OAPEC.
The report showed there are two refining projects planned in the UAE with a combined capacity of 900,000 and four in Saudi Arabia with a total output of nearly 1.6mn bpd. Iraq is also planning four new refineries while there are one each in Kuwait and Qatar, three in Syria, two in Egypt and one in Algeria.
In a recent study, OAPEC said new refining ventures in the Arab world would add nearly five million bpd to the current output within the next five years.
Most of the increase will come from the UAE, Saudi Arabia and Kuwait, which hold more than 40 per cent of the world's extractable crude deposits.
The new projects, which will cost at least US$100 billion, would boost production to 12.425 million bpd by the end of 2014 from 7.4mn bpd in 2008, OAPEC said.
"These projects will add nearly 5.03 million bpd to the Arab refining capacity...but they are beset with challenges and obstacles which could lead to postponement or abolition of some of them, mainly those related to new refineries," it said.
"These obstacles include shortage of funding and low investment return because refining ventures are normally not highly profitable...another challenge is the state of uncertainty prevailing the energy market due to ambiguities surrounding the global demand for refined products as a result of lack of transparency in most consumers about forecasts on future demand."
OAPEC said Arab refiners also face the problem of a growing trend by Western consumers to support the production of alternative fuel with the aim of reducing their import of refined products from foreign markets.
"Another key challenge is the sharp fluctuations in costs of refining projects, which have prompted regional countries to repeatedly re-evaluate their costs...the situation has been aggravated by the global financial crisis as it has caused fears among investors seeking to participate in those projects."
