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Sample Essay on Trends and the Future of Petroleum Refining

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Sample Essay on Trends and the Future of Petroleum Refining

Petroleum refining is a big topic of interest in geopolitics. The issue has a rich past, present and future thus making it a pungent matter for discussion. Petroleum is undoubtedly a pervasive issue in the world because it is used to power most of the modes of transportation. It is present in the plastics and composites used on daily basis which are necessary for building modern planes. It is an important commodity as it connects many countries on earth through international trade (Parra 14) thus quintessential in building international relations.  The trends and future of petroleum refining is influenced by technological advancement and geopolitics. The politics around petroleum entails the struggles around negotiations of the quantities received by countries and its use (Baylis et al. 45). Because most of the petroleum resources are under ownership of governments, these kinds of political negotiations typically happen between companies and host states interested in such resources. Petroleum refining is defined as the processing through which crude oil is converted into useful products (Parra 9). The research on this topic is indisputably considered relevant, timely and applicable taking in account developments over the years hence it’s quintessential to investigate and report facts on this matter.

Research Questions

RQ1. What Are the Present Trends and What Factors Influence Them? What Does the Future of Petroleum Refining Seek to Improve? The research sought to identify the trends and the future as named in the topic. Every form of advancement in any sector seeks to cause change and improvement. It is important to investigate the specific aspects of petroleum refining that will improve in the future. These aspects include technology, amount of petroleum refined in certain regions and availability, speed of refinery and the number of companies involved in the process.

RQ2. Which Countries Are Driving the Trends and Impacting the Future of Petroleum Refining? Approximately 80 percent of the proven reserves in the word exist in 8 countries, 7 of which are considered by the United States Energy Information Administration as either “high risk” or failed. It is vital to unearth whether these countries influence the current and future trends noted in petroleum refinery. The question also focuses on how consumers of oil influence the trends. As of now, the US is the world largest consumer of oil at about 30% of the total world production with China following at 16.5% and continuing to grow rapidly (Nicholas 1). India consumes only 5.5% but, together with China, they represent the future growth in demand for oil. Focus on some of the countries is vital in understanding how the trends are continuing to change as well as the future of international relations.

RQ3. What Are the Impacts of the Ongoing Trends in Petroleum Refining? The current trends in petroleum refining are translating into landmark impacts in various countries and reshaping geopolitics. Thus, it is important to illustrate these impacts in bid to have a clear understanding of this topic.

RQ4. What Is the Major Trend in the New US Refining Capacity?. In the last two years, a decrease of oil prices affected the rates of consumption in the US, especially of gasoline.

RQ5. What Other Trends in Sector Energy Are Expected to Impact the Future of Petroleum Refining? This question addresses other sectors in the oil production and uses that are likely to influence the current trends in petroleum refining such as technologies and the likely changes in the future.

 

How the Research Was Conducted

This being a qualitative research, relied on the existing information on media, journals, books and news papers representing people’s opinions and findings over this issue. The search for information avoided data that lacked credibility and validity and only focused on credible materials and renowned authors whose sources and findings could be verified as authentic and free of errors and fallacies.

Research Outcomes/Findings

RQ1. Based on press release from Global Industry Analysts Inc. the global market for petroleum refining is expected to exceed US$5.7 billion by the year 2020 due to high demand for motor vehicle fuel as well as steady progress noted in the quality of fuel. It came to light that each day, worldwide petroleum industry refined more than 85 million barrels of crude oil so that it can be able to meet the increasing demand for many petroleum products (Global Industry Analysis Inc. 1). Sales of automobiles and steady production coupled with increasing industrial activities are the key factors that are responsible for this growth in the market. A surge in demand for lubricants, gasoline diesel and fuel oil continued to encourage extensive increase in petroleum refining activity throughout the world (Global Industry Analysis Inc. 2). The petroleum firms are continuing to expand the capacities for production. Need for cleaner fuels from many countries are also driving refineries to promote the use petroleum refining catalysts in the process of refining oil. As refining catalysts for petrol are majorly used in removal of sulfur from diesel, oil and gasoline, key growth in the market has been marked by introduction of 0 percent sulfur gas to liquid diesels and phasing out of MTBE (Global Industry Analysis Inc. 1).  Consequently, Latin America, Asia-Pacific and Middle East are turning into hotspots for growth as a result of the ensuing surge in petroleum based products and robust economic activities. In fact, it was noted that Brazil is experiencing robust growth in economy because of recent discovery of natural gas and copious petroleum reserves along the Brazilian coast.

The most outspoken trend is the use of petroleum refining catalysts. This trend encompasses use of alkyl catalysts, hydrogen producing catalysts, hydro-processing catalysts, isomer forming catalysts and hydrodesulphurization catalysts among others (Global Industry Analysis Inc. 2). The most growing segment that is seen as part of the greater future of petroleum refining is the fastest-growing in the market for global petroleum refining catalysts industry. Due to stringent environmental regulations coupled with high demand for clean fuels, processing catalysts are the most demanded type (Global Industry Analysis Inc. 2). In bid to enable cost control and improve efficiencies of operations, there is notable use of high-severity hydrotreating catalysts (Global Industry Analysis Inc. 2). Also, the growth in the market is spurred by use of diesel production aided by small amounts of sulfur content.

RQ2. The Latin American nations will benefit from increased petroleum refining in the US. They will enjoy access to reliable petroleum products from the US and potential access to required technology. Mexico with vital shale deposits and South America with largest deposits will profit from entering into joint ventured with companies from the US. China is already making investments in shale joint ventures in the US with the aim of learning new techniques and technology (Baylis et al. 52). This move implies that China will possibly increase its petroleum refinery in the future. As for the case of Argentina, it will have to increase respect for private property rights and contracts to attract foreign investments to become a reliable partner. Mexico will also be compelled to pass additional energy reforms in order to establish modern regulatory framework and allow foreign investment in the country’s energy sector if it expects to efficiently improve its situation with gas and petroleum and exploit its oil reserves in deep-waters. As for Brazil, it will need to adopt less protectionist policies so that it can obtain the petroleum refinery technology to speedily and efficiently produce oil. Several forecasts indicate that the region with experience nominal increase in demand in the remaining decade. Unfortunately, the refineries in the region have not managed to maintain the level of demand and are constantly challenged to produce lower-sulfur transportation fuels and high grades. Latin America has announced several refining projects to help in curbing imports and is expected to add at least 600 Mbpd of new refineries by the end of the decade (Nicholas 1). The additional refineries started coupled with a prediction of a decreased demand in the region in the next few years will reduce refine fuel imports in Latin America.

RQ3. CEF predicts that the use of energy in refining sector will slightly decline below the present levels and intensity of energy will further decrease by 0.9% per year (Nicholas 1). The decline in energy consumption in the section is primarily fueled by reduced need for petroleum due to regulations around greenhouse gas emissions instead of energy efficiency gains in the sector (Nicholas 1). CEF also projects a dramatic decrease in petroleum fuels by 2020 because of the many regulations based on advanced scenario drive change to less carbon-intensive fuels while reliance on energy provided by natural gas will increase.

RQ4. International Energy Agency reported that the US will rise to become the largest producer of oil by 2020. The country would produce approximately 11.1 million barrels per day surpassing Russia and Saudi Arabia (EIA 1). The ongoing trend is that the rate at which the US imports oil is rapidly dropping from the present 10 mbpd to expected 4 mbpd in a decade due to the stricter fuel-efficiency standards of trucks and cars (EIA 1). These developments will result to important geopolitical and economic impactions for relations between the US and Latin America. Due to technological breakthroughs, the cost of extraction of petroleum has been reduced significantly resulting in drastic rise in production in the US.

US refiners are managing to produce excess for domestic supply. Even though the country is still having high rates of consumption of fuel, the trend is hardly translating to higher profits for companies refining petroleum. This trend is seen in inventory stockpiles. The country’s domestic market is full of gasoline and in the mid 2016, the stockpile for this commodity hit the highest level in 10 years. Nevertheless, there has been a dire decline in refining margins in recent past. In the future, refiners must stop the refinery to reduce stockpiles. According to EIA (1), consumption of liquid fuels in the US is predicted to increase by 1.5 MMbpd to 20 MMbpd in 2020s. In the near future, total consumption of petroleum in the US is forecasted to show a 170 Mbpd increase in 2016 as well as another 120 Mbpd this year. Also, the report indicates that production of middle distillate will increase by 80 Mbpd in 2017. This expansion is attributed to stronger growth in the US economy and colder winter temperatures hat provide ample conditions for refinery in many regions. At a consumption rate of more than 18 MMbpd, petroleum refining system in the US is clearly the largest and most detailed networks globally (EIA 1). As at now, the US has 139 petroleum refineries operating with most of them located along the Gulf Coast.

Since 2014, the biggest and most notable trend in the US petroleum refining activities is increased processing of lighter crude oils from the US shale. Shale boom has made the US to emerge as the world largest crude oil producer (EIA 1). Over the last decade, the country has risen to be a major exporter of refined petroleum due to enablement by high refining utilization as well as increase in production. Specifically, total amount of refined exports has surged by 2.0 MMbpd to almost 4.3 MMbpd between 2010 and 2015. In the last 15 years, refined petroleum productions from the US have more than quadrupled (EIA 1).

RQ5. The future of petroleum refining is marked by incorporation of heavy and sour crudes that demand energy-intensive processing more than premium crudes. It is expected that they would contribute towards a large percentage of petroleum production. Due to depletion of reserves, nations are competing for premium refiners that will increase utilization of heavy and sour crudes to meet the surge in demands. It is also projected that the future will be marked by increased use of unconventional sources of petroleum such as shale oil and tar sands, materials that need more energy intensive processing in order to separate petroleum from rock strata (Stratas Advisory 1). Disposal of byproducts of rock would impact environment leading to more energy consumption that would make processing of petroleum fit for refining. Additionally, fuel supply in transportation is being affected by increase in demand for biofuels. The Renewable Energy Standard demands that ethanol which is presently at 3% of gasoline supply of the nation should increase to 5% by 2012 (Stratas Advisory 1). Consequently, petroleum refineries will be required to increase manufacture of gasoline to suppose the growth in demand for ethanol. It is importation to note that production of ethanol requires more energy than petroleum refining. Additionally, the future of petroleum refinery lies in increased production of synthetic fuels used in blending diesel fuel, use of gas-liquids and coal to liquids thereby increasing other processes in the wake of high oil prices.

In conclusion, this research depicts the trend and future of petroleum in the world with discussions focusing on specific nations. The study questions were adequately answered in the findings with detailed accounts of how the factors influenced the topic. The United States of American is at the center of the geopolitics that strongly influences the future of oil refining. Use of new technologies pioneered by the US, new environmental regulations and surge in demand shape the current trends in petroleum refining and the future occurrences. Thus, they can be considered the core issues of focus of this research.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Works Cited

Baylis, John, Smith, Steve, & Owens, Patricia. The Globalization of World Politics: An Introduction to International Relations. Oxford University Press, 2010.

Global Industry Analysis Inc. MCP-2032: Petroleum Refining Catalysts-Global Strategic Business Report. Global Industry Analysis Inc., 2015.

Nicholas, Lindsey. Business Trends: Global Refining Overview—Part 3. API Monogram, Nov. 2016, www.hydrocarbonprocessing.com/magazine/2016/november-2016/trends-and-resources/business-trends-global-refining-overview-part-3. Accessed 19 March 2017.

Parra, Francisco. Oil Politics: A Modern History of Petroleum. I.B.Tauris & Co Ltd, 2010.

Stratas Advisory. Global Refining Outlook: 2016-2035. A Hart Energy Company, 2016.

U.S. Energy Information and Administration. Regional Refinery Trends Evolve to Accommodate Increased Domestic Crude Oil Production. EIA, 2015.

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