July 11, 2014 | By Barbara Vergetis Lundin

Research and consulting firm GlobalData is forecasting that the global refining capital expenditure (CAPEX) will reach approximately $333 billion between 2014 and 2020 -- an annual average of almost $48 billion and 1.6 million barrels per day (mmbd).

GlobalData breaks down total expenditures like this: Asia will claim 46 percent of the world's total, followed by China at 17 percent, India at 12 percent and "All Other Asia" at 17 percent. GlobalData attributes this to National Oil Companies (NOC) increasing capacity levels in China, India, Vietnam, Indonesia, Malaysia and Pakistan.

The Middle East's expenditure will account for 23 percent of capital spending by the end of 2020, with NOCs building capacity in Saudi Arabia, Kuwait, Iraq, Iran and the United Arab Emirates (UAE), according to GlobalData, in order to meet their growing oil demands for refined product export purposes.

"Thanks to the planned construction of efficient, large and complex grass-root refineries -- such as cracking and coking facilities, along with various expansion projects -- refining expenditures in the Middle East and Asia are forecast to represent a combined 70 percent share of the world's total spending," said Carmine Rositano, GlobalData's managing analyst for Downstream Oil & Gas. "Elsewhere, the CAPEX for Latin America (including Mexico), Africa, the Former Soviet Union and the United States is forecast at 18 percent, 8 percent, 4 percent and 1 percent of the global total, respectively."

China will be the largest single market with 17 percent of global CAPEX, correlating with 22 percent of all capacity additions up to 2020. GlobalData attributes the country's reasonable project costs to less expensive labor and the construction of large efficient refineries in areas with significant existing infrastructure, such as docks, pipelines and storage terminals.

By contrast, Africa will experience significantly higher production costs for its own new grassroot projects, which are planned in Nigeria, Angola and Gabon. These countries have a lack of highly-skilled workforces and minimal infrastructures, meaning that most, if not all, equipment, materials and labor will need to be imported.

"Further costs for this region will also result from the financial and geopolitical risks associated with the construction of onshore refining facilities in African countries, such as Algeria and Uganda," Rositano said. "These factors will push Africa's refining CAPEX to almost $28 billion by the end of 2020."

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