New Sensation – India Appears Primed to Lead the Next Era of Global Refining Expansions

Global refining is entering a new phase. After decades of capacity growth centered in China and the Middle East, the baton is passing to India, where rapidly rising fuel demand is driving a new wave of refinery investment. About 900 Mb/d of capacity is slated to come online through 2030, including expansions and grass-roots projects. More than 70% of this capacity is expected to start up before the end of next year, including some already beginning operations, adding perhaps 300 Mb/d of desperately needed middle distillate production. In today’s RBN blog, we examine India’s short- and long-term goals, the kinds of projects underway, and how the U.S. is playing a role in their development.

The state of refining and the global refined products market has been a frequent topic in the RBN blogosphere over the last several weeks, from war-related disruptions in the Middle East and Russia to surging diesel crack spreads and the possibility of a U.S. ban on diesel exports. But if U.S. refining capacity is near its limit and the disruptions in the Middle East and Russia continue, where could relief come from? As we noted in Help!, China is one potential alternative, largely because its refineries operate in a way that is unique in the global market. While refiners in the U.S. (and most everywhere else) make decisions on production rates, imports and exports based on what’s best for them individually, that’s not the case in China, where refiners operate within a very specific set of government controls. China has the potential to increase its refinery runs and product exports, but only if it chooses to do so, which isn’t necessarily based on market conditions

As noted in our recently updated Future of Fuels report, the two regions which led the way in refining additions over the past couple of decades, China and the Middle East, have largely moved away from adding fuels-focused capacity. Instead, India and (to a lesser extent) Africa are taking the lead in capacity increases and are likely to be responsible for most of total net global capacity growth through 2030. We expect India to add about 900 Mb/d of capacity through eight small/medium, mostly brownfield expansions at state-owned plants, accounting for about 60% of the 1,489 Mb/d of growth seen in the Asia Pacific region (green bar in Figure 1 below). In contrast, the U.S. (red bar) is expected to see its capacity fall by 66 Mb/d over the same period.