West Asia crisis threatens 2 mbpd of Gulf refining capacity: Rystad Energy

Up to 2 million barrels per day of Gulf refining capacity faces disruption as the Strait of Hormuz remains closed amid US-Iran tensions, threatening global oil supply, says Rystad Energy

The ongoing conflict in the Middle East has put up to 2 million barrels per day (mbpd) of Gulf refining capacity under threat, according to Norway-based energy research firm Rystad Energy.

 

India imports 65 per cent of its total LPG consumption, with 80 per cent of those imports sourced from Middle Eastern nations such as Qatar, Saudi Arabia and the UAE. These shipments transit through the Strait of Hormuz, making India’s supply sensitive to regional geopolitical tensions.

 

"As the Strait of Hormuz remains closed in the wake of the US-Iran military escalation, Gulf countries' oil inventory levels are reaching maximum capacity, posing serious challenges for regionally based refiners. Refiners may soon be forced to adjust operations, curtailing runs as product exports stall and directing output solely to domestic markets," Rystad Energy said in a report.

 

 

It added that as of now, Bahrain and Kuwait face the highest operational risk due to their export-dependent refining systems that offer zero alternative routes. "Production shut-ins and refining cuts will likely continue across the region as the war rages on, threatening 2 mbpd of global oil supply if the strait remains impassable for the next six weeks," said Pankaj Srivastava, senior vice president, commodity markets – oil at Rystad Energy.

 

He said three key factors will determine the resilience of refining systems across the Gulf -- bypassing the strait through alternate export routes, the balance of domestic product demand and refining capacity, and product exports as a ratio of current refinery runs.

 

Most impacts since the start of the conflict have been precautionary or limited in scope. Mina Al Ahmadi in Kuwait remained operational after debris damage, while Saudi Arabia’s Ras Tanura — already offline for scheduled maintenance that began in the last week of January — extended its outage window following drone attacks and a debris-related fire.

 

The most significant operational curtailments were in Qatar, where LNG production ceased at Ras Laffan and Mesaieed, according to Rystad. In the UAE, drones caused a fire at Fujairah storage tanks and ADNOC’s Ruwais complex. Although the unit struck has not been disclosed, reports indicate the Ruwais West refinery was taken offline as a precaution, with no injuries.