254. REFINERY BUILDING BOOM IN MIDDLE EAST

One of the oldest and most frequently parroted arguments for imminent peak oil is this:

The real reason no new refineries have been built for almost 30 years is simple: any oil company that wants to stay profitable isn't going to invest in new refineries when they know there is going to be less and less oil to refine.Source:LATOC

The fact that oil companies have not been building new refineries recently suggests they are well aware they will need fewer, not more, in future.Source:An idiot who reads LATOC

If there were oil in the future and they knew, they would be building refineries.Source:Another idiot who reads LATOC

Kenneth Deffeyes references this argument amongst all the other superficial tripe in his recent "four horsemen of the apocalypse" interview.

With the oil companies, you have to watch what they do and not what they say. What they're doing is taking in $10 billion and $20 billion a quarter in profits and handing it out as increased dividends, buybacks of their stocks, giving it to their executives. They're not drilling, they're not building new pipelines and not building new refineries. If there were good prospects out there, they'd be out there drilling like crazy.

In the previous entry (#253), we've already discussed why the majors aren't drilling like crazy. They're being shut out from all the best spots by NOCs (National Oil Companies), war and fiscal instability/disincentives. Intellectually dishonest soundbite-peddlers like Deffeyes continue to pretend that the only oil companies in the world are the "majors" (IOCs, International Oil Companies like BP, ExxonMobil etc.) -- conveniently ignoring the key fact that the majors are actually bit players, and the NOCs control 77% of the world's oil resources (click to enlarge):

Source

When we approach this topic honestly, and include NOCs in "oil companies", this peak oiler argument about nobody building refineries turns out to be just more ill-founded hype and deceipt:

New refineries will dramatically increase the Middle East oil exports to US and Europe - FT
New refineries will dramatically increase the Middle East oil exports to US and Europe

Financial Times reports that Europe and the US are expected to become increasingly dependent on the Middle East as an exporter of refined petroleum products over the next 10 years. New FT research shows that refining capacity in the Middle East is to overtake that of Russia and the former Soviet republics, where underinvestment has plagued the energy sector.

Aggressive policies to build big refineries that will boost capacity in the Persian Gulf by 60% will dramatically increase the region’s exports to US and Europe, just as Washington looks to break its dependence on oil from the Persian Gulf.

[...]

The Organisation of the Petroleum Exporting Countries, the cartel that controls 40 per cent of the world’s oil supplies, plans to increase its refining capacity by almost 6m barrels a day, or 50%, in the next seven years.Source: INTERTANKO Feb. 14, 2006

-- by JD