Despite narrower refining margins, US petroleum refinery capital spending will remain robust in the next two years, with about $9.2 billion worth of active capital projects (scheduled for construction start in 2016-2018) planned for 2016 and $9.3 billion in projects in 2017, according to market research firm Industrial Info Resources (IIR).


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Some $8.1 billion worth of active projects in the US with a construction kick-off in 2016-2018 are projected to be new builds and about $1.7 billion will be unit additions, based on the pipeline of announced projects, with the rest of the spending going into plant expansions and other in-plant capital.

Future spending in the US will be mostly driven by smaller, quick-return optimization & reliability projects, facility upgrades to address octane loss issues, as well as gasoline production increases as domestic refiners take advantage of cheap domestic feedstock, comply with environmental regulations and export more petroleum products to meet rising global demand.

There are currently a total of $10 billion active refining projects under construction in North America compared to $32.5 billion in projects in the Middle East, Chris Paschall, IIR’s vice president of global research for the petroleum refining industry, said at a webinar on March 15.

By contrast, projects at the planning & engineering stage that are planned to begin construction in 2016-2018 total about $58 billion (347 projects) in North America compared to $53 billion (280 projects) in the Middle East. Though not all of this planned investment will move forward, Paschall expects to see robust spending activity in North America in 2016.

Total capital spending in the US refining and marketing sector in 2016 is projected to rise from $13.5 billion in 2015 to $14.6 billion in 2016, up 8% year on year, according to the Oil & Gas Journal (OGJ).

OGJ’s projections assume oil prices of about $35 per barrel (b) for Brent and West Texas Intermediate (WTI) in 2016.

Brent and WTI crude oil prices are expected to average $34/b in 2016 and $40/b in 2017, according to the Short-Term Energy Outlook (STEO) published by the US Energy Information Administration (EIA) on March 16.