DUBAI (Reuters) – Spiraling costs in the energy sector could cut planned expansion of global refining capacity through 2011 by a fifth, mostly in the Middle East, an industry analyst said on Monday.
Projects to increase global refining capacity through 2011 totaled 10 million barrels per day but only 8 million bpd would be built, said Fereidun Fesharaki of FACTS Global Energy.
“Two million barrels of planned refining capacity are not going to happen in the Middle East and Asia, but mostly in the Middle East, due to cost escalation,” he said on the sidelines of an energy conference in Dubai.
Increasing costs are hitting oil and gas projects throughout the world as the energy industry strains to bring online new capacity to meet rising demand.
Kuwait deemed the first round of bids for a giant new 615,000 bpd refinery too costly in February and has yet to decide how it will proceed with the project.
Exxon Mobil and Qatar Petroleum in February dropped plans to build a multi-billion dollar clean fuel plant in Qatar due to rising costs.
OPEC President Mohammed al-Hamli said earlier at the conference that rising costs of equipment and raw materials, as well as labor shortages, were also making it hard for producers to build new upstream capacity.
“The fact that the market is relatively balanced does not mean producers are not facing difficulties meeting their responsibility,” he said.
But Hamli, who is also the energy minister for the United Arab Emirates, told Reuters that costs have not affected the country’s planned investments in energy capacity expansion.