80% of refinery projects face cancellation, IEA report warns

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Two thirds of the additional refineries worldwide are expected to be established in the Middle East and Asia.

The global collapse in oil demand may lead to the cancellation of up to 80% of refinery construction projects, a report has warned.

A report has been published by the International Energy Agency (IEA) and warned that a lack of investment into oil supply in the current climate could lead to prices climbing above the record US $147 a barrel seen this summer.

Only those refinery developments with confirmed backing from governments are expected to avoid the cutback.

Of 160 refining projects announced since 2005 and due for completion in the next two to seven years, only 30 would now go ahead, industry consultant Wood Mackenzie said.

National oil companies have leant their backing to almost all of the 30 refineries still on track.

The report said that between them, they will contribute 11 million of the 12 million barrels of new refining capacity expected to come online.

Two thirds of the additional refineries are expected to be in the Middle East and Asia.

If accurate, the prediction would see a substantial shift in the balance of refining from West to East.

Speaking at the launch of the 2008 World Energy Outlook report IEA executive director Nobuo Tanaka said, "Current trends in energy supply and consumption are patently unsustainable, environmentally, economically and socially. They can and must be altered."

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