US Oil and Gas Downstream Market - Analysis of Growth, Trends and Forecasts (2018 - 2023)
The US refineries are witnessing a constant increase in the refining capacity and are producing more fuel than before, which is expected to further surge during the forecast period, 2018 – 2023, to meet the rising overseas demand. The world is witnessing a constant upward shift in United State’s traditional role in the global market as a top importer and consumer. The US refiners achieved another record of exporting 2.5 million barrels per day (bpd) of petroleum products to foreign markets. That compares to net fuel imports of 2.3 million just a decade ago, according to the US Energy Information Administration.
The shale revolution has provided refiners with abundant and cheap domestic crude supplies, allowing them with the cushion required for producing international competitive fuel. The US shale production has almost doubled since shale revolution started in 2009, and is expected to increase further, thus, in turn, would also supplement the US oil & gas downstream market. On the flip side, shortage of labor with a large number of needed repairs and maintenance during the forecast period is expected to act as a restraint for the market and could result in increased project cost, work delay, and, increased accidental risks. Moreover, the resources of operators and contractors are under constant pressure from the surge in petrochemical projects in the United States, despite many of the firms having large balance sheets.
Surge in Shale Production to Boost Downstream Capacity Expansion
The exploration and production activities for unconventional resources, such as shale oil/gas and tight gas are expected to remain high during the forecast period, 2018 – 2023. The Gulf of Mexico (GOM) production in 2016 set an annual high of 1.6 million barrels per day (b/d), surpassing the previous record established in 2009 by 44,000 b/d. Market conditions are improving significantly amid rising oil prices, coupled with the support of a new and favorable administration with pro-energy policies, which understands the strategic importance of a healthy oil & gas industry, the production of oil and gas is expected to further increase in the United States. The abundance of domestic crude supply and booming exports are expected to bolster the margins for the US downstream operators, leading to increased refining capacity. Unlike other countries with mega-refining projects, the United States is expected to invest heavily in relatively small refining projects, primarily condensate splitter projects, to process light sweet oil shale production. Similarly, following a decade of lost competitiveness, the petrochemical industry is also reemerging as a growth industry, owing to the cost-benefit enjoyed from low-cost shale gas in the United States, and is expected to increase its export capacity further.
US Gulf Cost – Hotspot of US Downstream Business
The Gulf Coast region is the largest refining center in the United States and is home to approximately half of the country’s refining capacity. As of February 2017, the region had 52 operating refineries with combined crude distillation capacity totaling 9.5 million barrels per stream day (bpsd). The US Gulf Coast region is expected to witness a fresh wave of investment in the downstream business outlook during the forecast period, particularly in the petrochemical projects. In March 2017, ExxonMobil announced USD 20 billion worth of investment through 2022, to expand its chemical and oil refining plants on the US Gulf Coast, with the aim of creating a downstream manufacturing powerhouse along the US Gulf Coast. The US oil & gas downstream business is expected to significantly benefit from similar expansion projects during the forecast period.
Key Developments in the market