ICF Consulting Testifies on Refinery Capacity Before the U.S. House Government Reform Subcommittee on Energy and Resources

Tom O’Connor, an ICF Consulting fuels expert, testified on October 19 before the House Government Reform Subcommittee on Energy and Resources, U.S. House of Representatives, regarding the outlook for global refinery capacity investments and ramifications on United States’ oil products supply, demand, and imports in light of current strong refinery margins.

In his testimony, Mr. O’Connor said, “Investments in refining capacity have been occurring on an ongoing basis, and the higher margins seen in 2004 and in 2005 prior to the impact of Hurricanes Katrina and Rita are clearly stimulating more refining investment. However, the rise of global demands for oil products in recent years and especially 2004, primarily in the Far East, has resulted in global refinery capacity becoming very tight. The timing of the added refinery capacity in the United States and overseas could mean that refining margins may remain strong through 2010 if the demand trend continues unabated. The market for oil products will be supported additionally by an increasing push to lower sulfur levels in all fuels worldwide.”

A large share of the refining investment is for grassroots refineries in areas of very high demand growth and strong margins, such as China and India. Unlike the United States, these locations offer to refining investors the benefit of synergies with strong petrochemical growth, government support, lower labor costs, less regulatory cost, and less potential for construction delays due to permitting or siting issues.

ICF Consulting predicts that U.S. refiners will continue to increase capacity. However, ICF Consulting expects that a major grassroots refinery in the United States is not likely to be built due to high cost, questionable sustainability of good margins, and a time consuming and costly permitting process. In its testimony last week, ICF Consulting recommended several actions for regulators and stakeholders in the United States to consider, such as the need to raise awareness of energy conservation, streamline the permitting process, and reduce the number of boutique fuels. To read our complete testimony, visit http://www.icfconsulting.com/refinery.

About ICF Consulting
ICF Consulting (www.icfconsulting.com) is a leading management, technology, and policy consulting firm. Drawing upon extensive industry knowledge, distinguished professionals, and innovative analytics, the firm develops solutions to complex defense, homeland security, social program, energy, environment, and transportation issues. ICF Consulting’s approach to these issues is strengthened by its expertise in information technology, organizational improvement, research and evaluation, program management, and communications. Since 1969, ICF Consulting has been serving major corporations, government at all levels, and multinational institutions. More than 1,500 employees serve these clients in the Americas, Asia, and Europe.