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US refineries capitalize on Latin American shortfall

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Donna Carson/Reuters/File

(Read caption) Refinery workers walk inside the LyondellBasell oil refinery in Houston, Texas.

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2013 has been a bumper year for United States’ refineries and it is in no small part thanks to its largest overseas market -- Latin America.  

Although Latin America’s oil production has grown steadily in recent years, the region’s refineries have been unable to keep pace with rising demand, particularly in the transport sector. The shortfall has prompted Victorio Oxilia, president of the Latin American Energy Organization (OLADE), to declare the increase in petroleum product imports one of the region’s most pressing energy concerns.

There are several reasons for this. One is simply insufficient investment in local refining capacity. This is changing, with several projects underway. Interestingly the Chinese, who have been significant financiers of upstream oil operations across Latin America, have begun investing in the downstream sector. The China National Petroleum Corporation’s (CNPC) investment in the $12 billion Pacific Refinery in Ecuador is just one example, and we are likely to see more in coming years.

Another reason for the region’s relative decline in refining capacity is tightening regulations, meaning that pre-exciting refineries are unable to produce the quality of gasoline or diesel that meets national standards. Constructing more complex refineries capable of producing various fuel grades requires enormous investment. 

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