Global Processing

Latin American refining sector struggling to capitalize on growing oil output

September 9, 2013

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Latin America's oil production has been on the rise over the past few years but most economies in the region have had difficulties capitalizing on this development. The main reason for this is local refineries' inability to keep up with the pace and meet the rising demand in various sectors, particularly in transport.

While there are plenty of factors that have led to this situation, one of the most obvious ones is the lack of capital investment in refinery capacities. The situation is changing, albeit slowly. There are several major projects under development at the moment, such as the investment by the China National Petroleum Corporation in Ecuador's downstream specializing Pacific Refinery.

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Another major problem that prevents refining capacity from growing is the implementation of more stringent regulations in Latin American countries. Refineries which previously manufactured products that fully complied with regulations are now unable to meet the more rigid standards and comply with requirements for high-quality gasoline or diesel, experts commented.

On top of it all, the refining sector in most Latin American countries is almost entirely controlled by governments, which restricts private investments to a large extent, Oil Price reported.

It will take Latin America years to fully develop its energy sector potential and it can only happen with the active participation of governments, experts believe.