Asian refiners plan to expand as fuel demand grows

• Billions of dollars of investment planned
• India, China add capacity as economic growth boosts demand
• Contrast to restructuring in US, European refining sector

KUALA LUMPUR (Reuters): Refineries from Malaysia, China to India are investing billions of dollars in a fresh wave of capacity expansion to feed rising regional demand, while counterparts in the U.S. and Europe restructure or shut plants as fuel sales slow.

Fast-growing Asian economies are driving global fuel demand growth, taking an increasing share of the oil market from developed economies.

India’s Bharat Petroleum Corp plans to invest $4 billion to add 170,000 barrels per day (bpd) of refining capacity at its Kochi and Bina plants over the next three to four years, the company’s chief executive said ahead of the first day of an industry event in Malaysia’s capital Kuala Lumpur.

Malaysia’s state-run Petronas said last month it planned to build a $20 billion integrated refinery and petrochemicals complex that will raise the country’s total refining capacity by half to 935,300 barrels per day (bpd).

The plans are in contrast to Europe and the U.S. where companies are looking sell hundreds of thousands of barrels of refining capacity as demand falls and as natural gas and other fuels eat into the market.

The refinery sales are giving Asian energy giants an opportunity to gain a foothold in mature markets such as the U.S., the world’s largest oil consumer.

“Will the independents take bigger positions? Or will new companies come into the market? You hear lots of discussions of Asian companies establishing positions in the market,” Chief Executive of Tesoro Corp Gregory Goff told Reuters in an interview during an industry event in Malaysia.

In the U.S, energy giants from ConocoPhillips to Murphy Oil have announced plans to sell assets, potentially reshaping the country’s refining industry.  Chinese oil giant PetroChina agreed in January to buy into two refineries in France and Scotland of British firm INEOS, expanding its global refining foothold.  The framework deal between PetroChina , the world’s second most valuable energy firm and China’s second-largest refiner, and INEOS will allow the formation of refining ventures at the Lavera refinery in France and Grangemouth in Scotland.

New fuels

The switch to cleaner-burning natural gas for a wide variety of applications from heating homes and offices to running buses has eaten into oil demand.

Emerging nations such as Indian and China are also boosting the role of gas in their overall energy mix. They are expected to become increasingly dependent on imports of liquefied natural gas (LNG) this decade to fuel gas-fired power plants.

LNG suppliers Qatar and Australia will compete for the market.

Top LNG exporter Qatar will reach full capacity of 77 million tonnes per year (tpy) by the end of 2011, the head of the state oil marketing company said in Kuala Lumpur on Sunday.

Qatar already has the world’s largest capacity to ship super-chilled gas, and exported its first cargo from the latest plant to come into operation in February. That plant, Qatargas train seven, was the last to start up as the country completes its expansion plan.

The plant was still ramping up, Saad Abdullah al-Kuwari, chief executive of Qatar International Petroleum Marketing Co (Tasweeq), told Reuters in an interview ahead of an industry event in Malaysia.

“Train seven is almost stabilised and now it is ramping up. By end of this year we will be producing 77 million (tonnes),” he said.

Malaysia, the No. 2 liquefied natural gas exporter, expects its first LNG imports in 2013, according to a presentation from a senior government official at the event on Monday, as power generation demand rises in tandem with economic growth.

That shift in LNG trading means Malaysia will likely ship less to top buyers in Asia, leading to less export revenues for the trade-reliant Southeast Asian country and forcing its customers to look elsewhere.