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As part of OPEC’s ongoing efforts to support market stability by supplying required products to consumers, the cartel’s member countries will require investments to the tune of $66.5 billion in order to achieve a base refining capacity of 13.3 million b/d by 2021, M&P has gathered.

This is against the backdrop of a statement credited to Mohammed Sanusi Barkindo, OPEC Secretary General in the Monthly Oil Market Report (MOMR) for February 2017, “that oil and gas will continue to play a very important role in supplying the world’s energy needs, making up an estimated 53% of the global energy mix by 2040.”

However, while OPEC’s World Oil Outlook affirms that a significant number of new investments are set to occur in member countries, with the addition of almost 8 mb/d of potential refining projects, an assessment of the viability of such prospective projects suggest that just around 2.2 mb/d will be realistically added to the refining sector in OPEC Member Countries in the said time frame.

Presently, the 13 OPEC Member Countries put together, have an installed refinery capacity of 12.6mb/d, however, this is not a true reflection of their output. The actual throughput from these countries stand at 10.8mb/d, as a result of the inability of some Member Countries to maximize output from their ailing or aging facilities.

For example, according to OPEC's 2016 Annual Statistical Bulletin, Nigeria's four refineries with 445,000b/d combined capacity barely produce 21,900b/d, while Iraq with 900,000b/d, UAE with 1,124,000b/d and Libya with 380,000b/d installed refining capacity, barely produce 415,000b/d, 918,000b/d and 91,900b/d respectively.

According to the OPEC's MOMR cited by M&P, it is expected that additional refining capacity in OPEC Member Countries will come from condensate splitters, new greenfield and ‘grassroots’ projects, supplemented by expansions at existing facilities.

The largest OPEC Member Countries’ new refineries are expected to come on stream during the medium-term period; these are in Kuwait (Al Zour project), Saudi Arabia (Jizan project) and Venezuela (Anzoetagui). Other relatively sizable projects, with a common trend among crude producers to process heavy crudes domestically and also aiming to satisfy increasing local demand, include new refineries in Lobito, Angola; Manabi (Refinery del Pacifico), Ecuador; Khozestan and Kermanshah projects in Iran; Fujairah and Dubai projects in the UAE.

Algeria has chosen to settle for medium capacity refineries in Arzew, Hassi Messaoud and Tiaret to satisfy its growing local refined products demand. No clear picture can be envisaged yet from projects in Libya, while the 650,000 bpd Dangote Refinery in Nigeria was not factored into the mix, most likely because it is a private concern. Yet, this is not to discountenance the significant contributions the megaproject will add to the cartel’s overall refining capacity.

Recently, Barkindo stated in an interview that the positive outlook on global oil demand anticipates an increase from roughly 93m b/d in 2015 to over 109mn b/d by 2040. In relation to natural gas, demand is set to rise from around 350bn cf/d in 2015 to 590bn cf/d in 2040.

He said “This positive outlook, of course, hinges on huge investments being made to not only increase production from new areas, but also to compensate for existing fields on the decline. Between now and 2040, an estimated $10trn in oil-related investments will be required and roughly $6trn for gas.”

M&P findings however confirm that over the past two years, the industry has seen dramatic drops in investment due to the fallout of oil price slump. As a result, spending on global oil and gas exploration and production declined by around 26% in 2015, and an estimated additional 22% decrease in 2016.

According to the OPEC scribe, “Some have suggested that it is possible that we may see a third year of investment cutbacks, which would be unprecedented in the history of the oil industry. The fact is our industry needs a steady flow of ongoing investments to ensure the required supply gets to consumers in both the medium and long term, and OPEC will be instrumental in making this happen.”

In similar light, Dolapo Oni, an oil and gas expert and Head, Energy Research at Ecobank Plc, making a case for Nigeria said that we needed to invest in ramping up exploration and production and encourage investors to finance oil fields development.

He observed sadly that Nigeria’s output has been stagnant since 1980 and despite huge demand of the country’s oil abroad; oil field development was highly jaundiced without any new investments in sight.

OPEC generates approximately 42 percent of the world’s total crude oil production, and more than 20 percent of the world’s natural gas production. Moreover, OPEC owns more than four-fifths of total global crude oil reserves, and more than 47 percent of global natural gas reserves.

Data from OPEC’s MOMR-February 2017 was used in this report.