OPEC countries commit $ 58 bn for boosting global refinery capacity

The Organisation of Petroleum Exporting Countries (OPEC) has revealed that its member countries are committing a total of $ 58 bn to various refinery projects over the next six years in a twin-objective of boosting global refining capacity and ensuring stability in the international oil market.
Oil prices however, continued on the upward trend closing at a record $ 75.15 a barrel on concern that shipments from Iran and Nigeria will be disrupted as the US increases output of gasoline for the summer driving season.

Releasing the outline of the group's response to the seeming imbalance between available refining capacity and the demand for petroleum products globally, which is strongly linked to the upswing in crude oil prices, OPEC said its members, both individually and in partnership, have taken the initiative to invest in downstream projects both inside and outside their borders.
OPEC member-countries are Nigeria, Saudi Arabia, Algeria, Indonesia, Kuwait, Iraq, Iran, Venezuela, Libya, Qatar and the United Arab Emirates (UAE).

"Between end 2005 and end 2011, OPEC projects, either already under construction, being planned or under consideration, total 6.5 mm bpd of expanded refining capacity," the organization said.
"The accumulated investment required for the realization of these projects, based on the estimations by the secondary sources, would amount to around $ 58.0 bn within the period from 2005 to 2011. This is part of OPEC's ongoing efforts to ease market volatility and moderate prices to levels consistent with healthy economic growth, particularly in developing countries," OPEC added.

The organization noted that oil market volatility could be reduced by making the necessary downstream investments. It stated that the market volatility witnessed in recent months has been, to a large extent, the result of imbalance between the available refining capacity and the demand for petroleum products.
"Until the necessary investments are undertaken in the downstream sector of the industry, volatility is likely to remain a feature of the oil market. OPEC's investments in the downstream are part of its ongoing efforts to ease market volatility and to help prices to moderate toward levels consistent with healthy economic growth, particularly in the developing countries. However, these efforts will only be successful if they are met with similar efforts on the part of other producers and consumer countries," it added.

OPEC said it has medium and long-term plans in the downstream sector, consistent with its overall efforts to bring stability to the oil market.
"In more concrete terms, OPEC Member Countries are planning a 50 % increase in distillation and condensate splitter capacity, which would bring the combined capacity to 18.2 mm bpd by the end of 2011, a relatively short time span considering the usual lead times required for refinery expansion. These projects will at times require willingness on the part of international oil companies to participate and, on the part of consuming nations, readiness to provide the necessary permissions to become operational," it stated.

OPEC President and Nigeria's Minister of State for Petroleum Resources, Dr Edmund Daukoru said that 17 companies were at various stages of constructing refineries in Nigeria, including detailed engineering design and site preparations.
"Private investors have indicated interest and some have actually commenced construction of new refineries. The country is likely to most likely to have additional refining capacity by 2007," said Daukoru.

President Olusegun Obasanjo laid the foundation stone of the country's first indigenous private refinery, Orient Refinery in Nsugbe, Anambra State, where the president pledged that his government would continue to formulate policies that will further continue to consolidate the participation of Nigerian entrepreneurs in the nation's oil and gas sectors as after 45 years of nationhood our country men and women should not be mere spectators in an industry that is the live wire of our economy.
Meanwhile, oil prices closed a record $ 75.15 a barrel in New York Mercantile Exchange. On concern that shipments from Iran and Nigeria will be disrupted as the US increases output of gasoline for the summer driving season.

The standoff over Iran's nuclear program has intensified, increasing the chances of sanctions against the world's fourth- biggest oil producer. Attacks in Nigeria have shut about 20 % of output in Africa's biggest oil producer.
"Any kind of supply disruption will send us up toward $ 100," said Peter Schiff, chief executive officer of Darien, Connecticut-based brokerage Euro Pacific Capital, whose clients have about $ 400 mm in accounts at the firm. "Even without a hiccup we will see prices rise because of the supply-demand imbalances."

Crude oil for June delivery rose $ 1.36, or 1.9 %, to $ 75.05 a barrel. Futures touched $ 75.15 a barrel, the highest for a contract closest to expiration since trading began in 1983.
Oil prices more than doubled in 1979 after a revolution in Iran slashed the nation's oil exports. By February 1981 US refiners were paying an average $ 39 a barrel for imported oil, according to Energy Department figures.