China, India refining output growing rapidly-IEA

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LONDON, Nov 7 (Reuters) China's refining capacity is expanding rapidly but the industry faces a two-fold challenge of meeting a surge in domestic demand as well as stricter fuel standards, the International Energy Agency said on Wednesday.

In India, the refining sector is also booming although new projects could be hit by the significant budget overruns and delays seen in the oil industry globally, the IEA said in its World Energy Outlook 2007 which focussed on India and China.

According to the report, Chinese distillation capacity climbed 14 percent to about 7.5 million barrels a day in 2007, compared with 6.6 mb/d in 2006 An average of 460,000 barrels a day of additional capacity is expected to be brought on line annually over the next five years, much of it greenfield projects.

Installed capacity is due to reach 9.9 mb/d by 2012, with 55 percent of the new capacity built by Sinopec <600028.SS> and 27 percent by PetroChina <601857.SS>.

The IEA said current investment plans suggest Chinese refiners will be able to keep pace with the strong growth in the domestic market, which is expected to reach 9.8 mb/d in 2012.

Chinese refiners will also need to meet changes in local oil product demand.

The share of gasoline in total oil demand is expected to grow from 16 percent in 2006 to 23 percent by 2030, while that of middle distillates, including diesel and kerosene, rises from 37 percent to 42 percent.

India's refining capacity is expected to nearly double to 5.2 mb/d by 2014, as a result of expansions and major new greenfield refineries include Jamnagar, which is due to start up in 2009.

But the IEA warned that: ''continuation of the increasing delays and significant budget overruns being experienced by major projects around the world could cause delays or cancellations.'' India's refining capacity is expected to grow in line with domestic oil consumption, with distillation capacity reaching 8.1 mb/d in 2030.

With such growth, India will remain an export refining hub as it is well placed, near both Middle East crude supplies and the fast-growing products markets in the Middle East and Asia.

''Lower costs compared to other countries contribute to the competitiveness of Indian refining,'' said the IEA, adding that, attractiveness of future investment will depend partly on custom duties, which currently favour crude imports over products imports, and domestic pricing policies.

REUTERS BJR DS1622

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