Oil firms will struggle to build new refineries fast enough to keep up with Asian demand growth for at least the next three to four years, an official with one of the world’s top five energy contractors said.

Despite a reluctance by some of oil’s biggest names to invest in the cyclical industry for fear of another downturn, a resurgence in demand for new plants from Asian companies has strained the abilities of specialised firms that do the work.
A shortage in spare refining capacity after years of underinvestment has helped push oil prices above $60 a barrel this year, and delays in adding new capacity may prolong the rally, which has seen prices double in two years.
“We don’t have enough contractors and we don’t have enough raw materials,” to satisfy customer demand, said Ryutaro Iwai, deputy general manager of marketing and research at JGC Corp’s business development and promotion division.
“This means some of the projects might be delayed and could be cancelled in the worst case,” he said.
Asia will add only 3.25 million barrels per day (bpd) of new refining capacity through expansion, debottlenecking or new construction by the end of this decade, according to Iwai. The Middle East will add 1.7 million bpd by 2011.
Oil demand in Asia rose 1.15 million bpd last year alone, although it is expected to climb a milder 750,000 bpd this year, according to the International Energy Agency (IEA).
“Asian refiners are also increasing exports to outside of the region, such as United States because of refining capacity shortage there,' Iwai added.
“The Asian refining industry will make a good profit at least until the year 2008 or 2009 because growth in oil demand will exceed the capacity until that time,” he said.
The biggest competition for extra Asian refinery capacity will be the Middle East, where Opec producers are aggressively expanding capacity to add value to their crude output.