Oil majors resist pressure to invest in new refineries as fuel prices keep rising

{"text":[[{"start":8.78,"text":"Oil majors have elected to use their war-driven windfall profits to hand billions of dollars to shareholders and pay down debt despite political leaders calling for heavy investment to bolster the west’s refining capacity."}],[{"start":21.66,"text":"ExxonMobil, Chevron, BP, Shell and TotalEnergies posted combined third-quarter net income of more than $50bn this week as global prices of petrol, diesel and jet fuel remained near record highs."}],[{"start":36.18,"text":"Shell raised its buyback to $5bn for the current quarter and Exxon committed to another $20bn programme for 2027, while BP’s windfall profits are largely going into debt reduction."}],[{"start":47.88,"text":"Profits were driven higher by the companies’ refining divisions, which were running at nearly full capacity as they sought to capitalise on high prices and make up for a supply shortfall after the Iran war choked off shipments through the Strait of Hormuz."}],[{"start":61.28,"text":"About 10 per cent of global refining capacity has been taken offline this year following the start of the Iran war and Ukrainian attacks on Russian refineries. Beijing and Moscow’s export restrictions have tightened the market further."}],[{"start":74.66,"text":"Industry bosses said the conditions that have driven up margins would remain for some time, while the International Energy Agency has predicted the diesel shortage would last into 2027."}],[{"start":84.41,"text":"US President Donald Trump, who has urged companies to boost domestic refining supply chains, called oil bosses to a White House meeting in September to discuss how to cut fuel prices. G7 and EU leaders have also urged more investment to boost energy security in the wake of the market’s disruption."}],[{"start":102.34,"text":"The oil majors have made small investments in existing refineries to increase yields and boost utilisation rates, but they have held back from constructing costly new facilities that would take years to come online."}],[{"start":114.26,"text":"Morningstar analyst Allen Good said because fuel demand is projected to eventually decline, “no one is going to build a greenfield refinery in Europe and the US, given the time it would take”. “I don’t think anyone thinks the margins today are in any way sustainable,” he added."}],[{"start":null,"text":"

"}],[{"start":129.46,"text":"Exxon, which reported a record refining profit in the third quarter, said it was in the process of expanding the Baytown facility in Texas, but it would not increase refining investment from the $9bn already earmarked for the next four years. The company finished a $2bn expansion of the Beaumont refinery in Texas in 2023."}],[{"start":148.54,"text":"BP’s chief executive Meg O’Neill said that while the company was not looking to offload any more refineries, after selling its Gelsenkirchen facility in Germany this year, it would also not add capacity “at this point in time”."}],[{"start":null,"text":""}],[{"start":163.617,"text":"Smaller US refiners have also held back from investments. Phillips 66 said in its earnings call this week that it was focusing the bulk of its investments on midstream assets, which store or transport refined products."}],[{"start":175.24,"text":"Like the oil majors, Phillips 66 has made smaller investments at its facilities. “They are not [hugely] game-changing, you know, multibillion-dollar investments,” said Brian Mandell, executive vice-president of marketing and commercial for Phillips 66."}],[{"start":189.34,"text":"“They are hundreds or tens of millions of dollars of investment” allowing the company to “creep” up the capacity and utilisation of the assets."}],[{"start":198.932,"text":"Valero, another US oil refiner, on Friday bought an idle Houston refinery from LyondellBasell for $320.5mn. The company said it would initially restart 165,000 barrels per day of light sweet crude processing capacity by the end of 2027, with the goal of taking heavier crude later on."}],[{"start":217.36,"text":"As refining capacity has fallen in the US and Europe, investment has continued in other parts of the world."}],[{"start":223.34,"text":"Since 2019, China and the Middle East have added 4.4mn b/d, while Europe and North America shed 2.1mn, according to the Federal Reserve Bank of Dallas. New refineries have recently come online in Nigeria, India and Mexico."}],[{"start":238.78,"text":"Joe DeLaura, senior energy strategist at Rabobank, forecast oil will average $120 per barrel for Brent, the international benchmark, in the first half of next year, with the diesel refining margin, or crack spread, staying around $100 per barrel over the same period."}],[{"start":null,"text":""}],[{"start":255.3,"text":"Oil groups have proven reluctant to invest in new refining facilities despite the prospect of a potential escalation in hostilities in the Middle East, a scenario that DeLaura said would send prices higher and drive global inflation."}],[{"start":268.18,"text":"Trump has said his government “may do another little Epic Fury”, referring to the Pentagon’s name for the war that he launched against Tehran in February."}],[{"start":277.06,"text":"“Iran and the US are both likely to target infrastructure at a much greater scale than they did at the early stages of this war,” said DeLaura. “Energy infrastructure is likely to be attacked. This will force diesel crack spreads, [petrol] crack spreads upward and oil upward as well.”"}],[{"start":300.66,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1793512294_7891.mp3"}