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GCC to take bigger share of global refinery capacity

The GCC region's share of the global refining capacity is predicted to "increase significantly" over the next few years, according to a new report from rating agency Moody's.

Moody's outlook on the Gulf's oil and gas sector was deemed stable, reflecting the sector's position to "capture a significant portion of the expected increase in global energy needs, especially in Asia".
Although the agency said the recent economic downturn and tighter credit conditions had negatively affected investments in the industry, it was confident that governments would spend to support the sector.

"We believe that key projects that will produce long-term benefits to host countries are likely to go ahead, driven primarily by the determination of regional governments to support their most vital sector," said Raffaele Semonella, a Moody's associate analyst in Dubai.

The agency also predicted that the GCC countries' share of world refining capacity was likely to rise as the region aimed to take a greater share of the higher-value production chain.

"We believe that the region's large and high-complexity projects are likely to be better positioned to withstand the cyclicality of the refining industry," added Philipp Lotter, senior vice president in Moody's Corporate Finance Group in Dubai.

"We also view favourably the long-term plans of GCC governments to capture a greater share of the sale of premium products, despite the considerable investments that are required over the medium term."

Moody's new report said that, paradoxically, the region has been experiencing a severe gas shortage due to rising domestic consumption, which has mainly been driven by the spiralling demand for electricity generation and water desalination.

"Key economic incentives need to be established to address this issue, which will otherwise negatively affect future growth prospects," said Lotter.

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