Costs hit drive for more oil refineries-IEA

By Ikuko Kao

LONDON, July 1 (Reuters) - The global oil market will see about 40 percent less additional refining capacity in 2012 than expected as a results of project delays due to increasing costs, the International Energy Agency said on Tuesday.

"Increasing cost pressures have added 50 percent to investment expenditures over the past two years," the IEA, the energy advisor to the world's most industrialised countries, said in its Medium-Term Oil Market Report for 2008-2013.

"This, in combination with rising lead times for delivery of upgrading and hydrotreating units, has caused significant slippage to expected capacity expansions, reducing our 2012 global crude distillation capacity estimate by 1.0 million barrels per day from last year's assessment."

The IEA now expects new refinery capacity of 1.44 million bpd to come online in 2012.

The cumulative refinery capacity additions will total 8.8 million bpd from 2008 to 2013, it said.

Most of the capacity additions will be focused in the Middle East, China and India, where a large part of expected demand growth is expected.

The IEA warned that further refinery project delays may be likely.

Costs are not expected to fall and weakening values of gasoline to increasingly more expensive crude oil may also worsen refinery profitability.