From my somewhat snooty viewpoint of a career begun in the glamorous “upstream” business of finding and extracting oil and gas, refining has long seemed necessary but unappealing. The process of turning crude oil into usable products has been plagued by low profitability and overcapacity. Now, things have dramatically turned around, but for how long?
Oil and gas production reaps the reward of prices, currently about $112 a barrel, minus costs and taxes. It takes place wherever the geology and politics permit, from deserts to tundras to 3,000-metre oceanic depths.
The downstream, by contrast, is a margin business. Profits are derived from the spread between the input cost of crude oil and the prices of outputs — petrol, diesel, jet fuel, cooking gas, heavy fuel oil, asphalt for roads, lubricants, feedstocks for plastics, and others.
Global refining margins — the gross profit for processing one barrel of crude — typically hover between $2 and $5. Sometimes they go negative. Sophisticated refineries, with greater flexibility, are able to process lower-quality crudes, or produce more high-valued products, can do better.
Out of this, the refiner has to pay for fuel, electricity, labour, maintenance, the capital cost of the facility and a host of other expenses.
Refineries need constant investment to meet tightening safety and environmental standards and a changing demand mix. They often carry heavy liabilities: unionised workforces and pensions and pollution legacies from less stringent eras. In Europe, they have to cope with soaring natural gas and carbon prices.
On the cusp of the coronavirus pandemic, things looked grim for refiners. Almost 10 million barrels a day of new capacity was due to come online by 2025, mostly in India, China and the Gulf. But demand for refining was close to a peak — because of rising fuel efficiency, biofuels, electric vehicles and petroleum liquids derived from natural gas, required minimal processing.
Among global refining mainstays, oil demand in Europe has been in decline since 2006; in Japan, since 1996.
Governments resist closures, though, firstly because of the loss of jobs, and secondly because of worries about the security of supply of importing refined fuels.
The Australian government has offered subsidies to keep its last two remaining refineries running. In some developing countries, politicians demand the construction of refineries even with a poor commercial rationale to dole out patronage, win prestige, develop the local economy or reduce imports.
Not surprisingly, major integrated oil companies such as Shell, BP and TotalEnergies — that combine oil and gas production, refining and fuel retail — have been selling or closing refineries, or converting them to biofuels processing or storage terminals.
Since the onset of the pandemic, which temporarily crushed transport fuel consumption, about 3 million barrels per day of worldwide refining capacity has been shut down. As demand rebounded, the remaining plants are struggling to produce what is required.
Diesel, the key commercial fuel, is in short supply. Refiners can reconfigure to yield more diesel and less jet fuel, but now air travel is rebounding. Trying to produce both reduces the output of petrol.
The Opec+ production restrictions, sanctions on Iran and Venezuela, and some loss of output from Russia, crimp the availability of diesel-rich, medium-gravity crude oils. Very light US feedstock is less suited to current consumer demand.
Russia typically exports more than 1 million barrels a day of oil products to Europe; now that is reduced by buyer unwillingness and sanctions. Its Ministry of Economic Development expects a 20 per cent drop in shipments this year.
And a vital supplier of the Asian market, China, has cut its refineries’ export quotas by more than half to cut pollution and rationalise the industry.
Diesel stocks in Europe, US and the key trade centre of Singapore have drained to multi-year lows. So, refining margins have soared above $30 a barrel on a global basis and $50 in some locations.
Even though crude prices are, historically speaking, not that high, the squeeze on refined products is driving end-user prices to records, for example in the UAE, equivalent to $176 a barrel for diesel. This contributes to inflation, fuel shortages and global economic worries.
The Middle East, though, is now benefitting from its expanded refining capacity. Huge new plants have economies of scale, are sophisticated to maximise the output of high-value products, match the latest European environmental fuel specifications, and often realise synergies by integration with petrochemical units. They serve still fast-growing markets in the Gulf and South Asia.
Four new mega-facilities totalling almost 1.4 million barrels per day are on their way. Jazan, in south-western Saudi Arabia, began operations last year and is now commissioning its diesel production. Kuwait’s Al Zour should start up soon, Iraq’s Karbala in the autumn and Oman’s Duqm early next year.
Adnoc is completing its “crude flexibility project”, allowing the Ruwais refinery to run different types of feedstock, including imports if preferable. But in October, it decided to cancel a new refinery at the site that would have been ready in 2026, finding it economically unattractive.
Dubai’s Enoc raised the capacity of its Jebel Ali plant in 2020, and Abu Dhabi, Fujairah, Egypt, Iran, Iraq and Bahrain have implemented various other expansions and upgrades.
A giant new refinery in Nigeria, built by Aliko Dangote, Africa’s richest person, is expected to begin processing in the third quarter of this year, finally easing the crude-rich nation’s paradoxical dependence on imported fuels.
The value of such plants in today’s market is shown by Saudi Aramco’s first-quarter results: upstream profit improved 75 per cent on higher crude prices and production. But downstream, including refining, gained 130 per cent. The company has bought a stake in Poland’s second-largest refinery and agreed to develop a new complex in China.
Refiners today are enjoying the best of times. But the imminent new capacity and a potential economic slump should ease current fuel shortages, and then climate action and battery vehicles loom. So they face a dilemma: keep investing, or cash in now on what might be refining’s last golden age.
Robin Mills is chief executive of Qamar Energy, and author of The Myth of the Oil Crisis
UAE currency: the story behind the money in your pockets
UAE squad
Esha Oza (captain), Al Maseera Jahangir, Emily Thomas, Heena Hotchandani, Indhuja Nandakumar, Katie Thompson, Lavanya Keny, Mehak Thakur, Michelle Botha, Rinitha Rajith, Samaira Dharnidharka, Siya Gokhale, Sashikala Silva, Suraksha Kotte, Theertha Satish (wicketkeeper) Udeni Kuruppuarachchige, Vaishnave Mahesh.
UAE tour of Zimbabwe
All matches in Bulawayo
Friday, Sept 26 – First ODI
Sunday, Sept 28 – Second ODI
Tuesday, Sept 30 – Third ODI
Thursday, Oct 2 – Fourth ODI
Sunday, Oct 5 – First T20I
Monday, Oct 6 – Second T20I
Also on December 7 to 9, the third edition of the Gulf Car Festival (www.gulfcarfestival.com) will take over Dubai Festival City Mall, a new venue for the event. Last year's festival brought together about 900 cars worth more than Dh300 million from across the Emirates and wider Gulf region – and that first figure is set to swell by several hundred this time around, with between 1,000 and 1,200 cars expected. The first day is themed around American muscle; the second centres on supercars, exotics, European cars and classics; and the final day will major in JDM (Japanese domestic market) cars, tuned vehicles and trucks. Individuals and car clubs can register their vehicles, although the festival isn’t all static displays, with stunt drifting, a rev battle, car pulls and a burnout competition.
The full list of 2020 Brit Award nominees (winners in bold):
British group
Coldplay
Foals
Bring me the Horizon
D-Block Europe
Bastille
British Female
Mabel
Freya Ridings
FKA Twigs
Charli xcx
Mahalia
British male
Harry Styles
Lewis Capaldi
Dave
Michael Kiwanuka
Stormzy
Best new artist
Aitch
Lewis Capaldi
Dave
Mabel
Sam Fender
Best song
Ed Sheeran and Justin Bieber - I Don’t Care
Mabel - Don’t Call Me Up
Calvin Harrison and Rag’n’Bone Man - Giant
Dave - Location
Mark Ronson feat. Miley Cyrus - Nothing Breaks Like A Heart
AJ Tracey - Ladbroke Grove
Lewis Capaldi - Someone you Loved
Tom Walker - Just You and I
Sam Smith and Normani - Dancing with a Stranger
Stormzy - Vossi Bop
International female
Ariana Grande
Billie Eilish
Camila Cabello
Lana Del Rey
Lizzo
International male
Bruce Springsteen
Burna Boy
Tyler, The Creator
Dermot Kennedy
Post Malone
Best album
Stormzy - Heavy is the Head
Michael Kiwanuka - Kiwanuka
Lewis Capaldi - Divinely Uninspired to a Hellish Extent
Dave - Psychodrama
Harry Styles - Fine Line
Rising star
Celeste
Joy Crookes
beabadoobee
Globalization and its Discontents Revisited
Joseph E. Stiglitz
W. W. Norton & Company
Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
Price: From Dh590,000
How to tell if your child is being bullied at school
Sudden change in behaviour or displays higher levels of stress or anxiety
Shows signs of depression or isolation
Ability to sleep well diminishes
Academic performance begins to deteriorate
Changes in eating habits
Struggles to concentrate
Refuses to go to school
Behaviour changes and is aggressive towards siblings
Begins to use language they do not normally use
How to wear a kandura
Dos
- Wear the right fabric for the right season and occasion
- Always ask for the dress code if you don’t know
- Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work
- Wear 100 per cent cotton under the kandura as most fabrics are polyester
Don’ts
- Wear hamdania for work, always wear a ghutra and agal
- Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
'Saand Ki Aankh'
Produced by: Reliance Entertainment with Chalk and Cheese Films
Director: Tushar Hiranandani
Cast: Taapsee Pannu, Bhumi Pednekar, Prakash Jha, Vineet Singh
Rating: 3.5/5 stars
MATCH INFO
Tottenham Hotspur 3 (Son 1', Kane 8' & 16') West Ham United 3 (Balbuena 82', Sanchez og 85', Lanzini 90' 4)
Man of the match Harry Kane
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
Huroob Ezterari
Director: Ahmed Moussa
Starring: Ahmed El Sakka, Amir Karara, Ghada Adel and Moustafa Mohammed
Three stars
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%3Cp%3E%E2%80%A2%20The%20digitisation%20of%20financial%20services%20will%20continue%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Managing%20and%20using%20data%20effectively%20will%20become%20a%20competitive%20advantage%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Digitisation%20will%20require%20continued%20adjustment%20of%20operating%20models%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20Banks%20will%20expand%20their%20role%20in%20the%20customer%20life%20through%20ecosystems%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20The%20structure%20of%20the%20sector%20will%20change%3C%2Fp%3E%0A
World%20Food%20Day%20
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TO%20CATCH%20A%20KILLER
%3Cp%3E%3Cstrong%3EDirector%3A%20%3C%2Fstrong%3EDamian%20Szifron%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%3C%2Fstrong%3E%20Shailene%20Woodley%2C%20Ben%20Mendelsohn%2C%20Ralph%20Ineson%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%202%2F5%3C%2Fp%3E%0A
Countries recognising Palestine
France, UK, Canada, Australia, Portugal, Belgium, Malta, Luxembourg, San Marino and Andorra
Rooney's club record
At Everton Appearances: 77; Goals: 17
At Manchester United Appearances: 559; Goals: 253
Try out the test yourself
Q1 Suppose you had $100 in a savings account and the interest rate was 2 per cent per year. After five years, how much do you think you would have in the account if you left the money to grow?
a) More than $102
b) Exactly $102
c) Less than $102
d) Do not know
e) Refuse to answer
Q2 Imagine that the interest rate on your savings account was 1 per cent per year and inflation was 2 per cent per year. After one year, how much would you be able to buy with the money in this account?
a) More than today
b) Exactly the same as today
c) Less than today
d) Do not know
e) Refuse to answer
Q4 Do you think that the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.”
a) True
b) False
d) Do not know
e) Refuse to answer
The “Big Three” financial literacy questions were created by Professors Annamaria Lusardi of the George Washington School of Business and Olivia Mitchell, of the Wharton School of the University of Pennsylvania.
Answers: Q1 More than $102 (compound interest). Q2 Less than today (inflation). Q3 False (diversification).
UAE currency: the story behind the money in your pockets
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
Results
Female 49kg: Mayssa Bastos (BRA) bt Thamires Aquino (BRA); points 0-0 (advantage points points 1-0).
Female 55kg: Bianca Basilio (BRA) bt Amal Amjahid (BEL); points 4-2.
Female 62kg: Beatriz Mesquita (BRA) v Ffion Davies (GBR); 10-2.
Female 70kg: Thamara Silva (BRA) bt Alessandra Moss (AUS); submission.
Female 90kg: Gabreili Passanha (BRA) bt Claire-France Thevenon (FRA); submission.
Male 56kg: Hiago George (BRA) bt Carlos Alberto da Silva (BRA); 2-2 (2-0)
Male 62kg: Gabriel de Sousa (BRA) bt Joao Miyao (BRA); 2-2 (2-1)
Male 69kg: Paulo Miyao (BRA) bt Isaac Doederlein (USA); 2-2 (2-2) Ref decision.
Male 77kg: Tommy Langarkar (NOR) by Oliver Lovell (GBR); submission.
Male 85kg: Rudson Mateus Teles (BRA) bt Faisal Al Ketbi (UAE); 2-2 (1-1) Ref decision.
Male 94kg: Kaynan Duarte (BRA) bt Adam Wardzinski (POL); submission.
Male 110kg: Joao Rocha (BRA) bt Yahia Mansoor Al Hammadi (UAE); submission.
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