In a recent report to Rigzone, analysts at BMI, a Fitch Solutions company, noted that they now expect stronger growth in Australia’s refined fuel demand in 2023, “driven by increased demand for air travel, which will remain until the end of the year.”
“We have revised our forecast for Australian refined fuel demand to 2023, from previously forecasting 2% year-on-year growth to now forecasting 6% year-on-year growth,” the analysts said in the report.
“This will push the country’s total demand up to 1.065 million barrels per day, just below the pre-pandemic demand level of 1.088 million barrels per day seen in 2019,” they added.
In the report, analysts noted that Australia’s demand for jet fuel/kerosene in the first quarter of 2023 was up 67 percent, or 55,000 barrels per day, compared to the same period last year past Prior to the pandemic, jet fuel/kerosene had averaged 15 percent of the country’s total oil demand over 2015-2019, however pandemic-era air travel restrictions saw that its share would decline to seven percent on average in 2021 and 2022, analysts noted in the report.
“Industry trade groups are reporting very strong demand for domestic air travel in Australia in early 2023, doubling from a year ago,” analysts said in the report.
“Furthermore, there is room for further growth given that domestic air travel still remains at approximately 90 percent of pre-pandemic levels,” they added.
“The recovery will also be supported by the revival of air routes to mainland China since the country’s economic reopening. Before the pandemic, China was the main source of visitors to Australia,” they continued.
The latest Statistical Review of World Energy, which was released by the Energy Institute (EI) last month, showed Australia’s total petroleum liquids consumption was 1.012 million barrels per day in 2022, 944,000 barrels per day in 2021, 919,000 barrels per day in 2020. , and 1.069 million barrels per day in 2019.
Australia’s highest total petroleum liquids consumption year, according to the report, dating back to 2012, was 2018, when the country was shown to consume 1.08 billion barrels per day. The year with the least consumption was 2020, the report highlights.
From 3 January 2020 to 28 June 2023 at 17:56 CEST, there have been 11.495 million confirmed cases of Covid-19 in Australia with 21,685 deaths, according to the latest data from the World Health Organization (WHO). As of March 24, 2023, a total of 65.492 million doses of vaccine have been administered in the country, WHO figures show.
Australia refining output, refined fuel import
In their report, BMI analysts noted that planned maintenance work and an outage at Australia’s two refineries will see refining production contract this year.
“We maintain our forecast for a 2.5% year-on-year decline in Australian refining output in 2023, although output in the first three months of 2023 was flat compared to last year,” analysts said in the report.
“Production will be weakened for the rest of 2023 due to major planned maintenance work currently taking place at the Geelong refinery (120,000 barrels per day), which is expected to last for around six weeks,” they add.
“In addition, the fluidized catalytic cracking (FCCC) unit that produces approximately 18,000 barrels per day of gasoline at the Lytton refinery has been offline since March 2023 due to an outage caused by mechanical issues,” they stated .
In the longer term, analysts noted in the report that they maintain a bearish outlook on Australia’s refined fuel production. In the report, they emphasized that they expect this to decline by 20 percent by the end of their forecast period, which extends to 2027, “to 207,000 barrels per day of production.”
“The country’s two remaining refineries will struggle to compete with growing competition from refineries in the Middle East and Asia, which will benefit from scale and cost advantages, as well as geographic proximity to some of the oil-importing markets biggest in the world”. analysts warned in the report.
“In this regard, we see China’s refining capacity increasing by 1.2 million barrels per day by 2027. Similarly, Kuwait and the United Arab Emirates will have a combined additional capacity of 680,000 barrels per day by 2027, supported by for the new 615,000 barrels per day Al Zour mega-refinery, which we expect to be fully operational by 2024,” they added.
In turn, this will further exacerbate Australia’s reliance on refined fuel imports in the short term, analysts said in the report.
“We now see Australia’s imports of refined fuels rising to 805,000 bpd in 2023 from 738,000 bpd in 2022,” the analysts said in the report.
“This will benefit regional refined fuel export partners such as South Korea, Malaysia, Singapore and China. Australian government data shows the four countries accounted for 70 percent of Australia’s refined fuel imports in December 2022, with near-term growth potential,” they added.
“In particular, Australia’s imports of jet fuel and kerosene will increase, given the lack of capacity to increase domestic production,” the analysts continued.
Australia’s two remaining refineries are heavily geared towards diesel and gasoline production, with jet fuel/kerosene production making up just five percent of domestic refining output in recent years, analysts at the BMI in the report.
“In the longer term, we expect Australia’s imports of refined fuels to continue to rise, but at a slower pace, rising to one million barrels per day by the end of our forecast period, driven by a bearish outlook for the country’s domestic refining production, which will be insufficient to meet growing domestic demand,” the analysts said in the report.
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