Location, low costs, and lower environmental standards are driving these expansions, occurring mainly in China, India, Saudi Arabia, Vietnam, Indonesia, Kuwait, and Japan. Because of higher costs and regulatory and environmental hurdles, fewer amounts will be built in the U.S. and Europe.

Asia, meanwhile, is open for business. And global fuel demand is soaring, particularly for middle distillates. Worldwide demand from the transportation sector is expected to rise by some 6 million barrels per day between now and 2015, making it the biggest contributor to new products sales.

Much of the new demand is expected to come from China and India. Last year, more than 1 million cars and trucks were bought in India, the world’s fastest growing auto market. By 2016, the number of vehicles in the Asia-Pacific region is expected to rise by over 50 percent to over 300 million.

India, for example, would be in a surplus position with the commissioning of their export-oriented refinery projects. Topping the list of new projects are Reliance Petroleum’s 580,000 barrels per day refinery at Jamnagar, Indian Oil Corp.’s 300,000 bpd Paradip refinery in Orissa, Hindustan Petroleum’s 180,000 bpd Bhatinda plant in Punjab, Bharat Petroleum’s 120,000 bpd Bina refinery in Punjab, and Essar Oil’s expansion of its 210,000 bpd Vadinar refinery.

However, the picture may not be all that rosy. Reliance Petroleum is among the Asian refiners whose profits may shrink as increased fuel-making capacity causes a glut. The profit in Asia from turning crude oil into fuels may fall by half over the next four years as new plants begin production, with margins falling from $8 per barrel this year to as little as $4.50 per barrel by 2010. This looming overcapacity may be the reason that BP pulled out of a proposed $3 billion refinery project in India last year.

Including expansion projects at existing refineries, Asian production capacity will grow by 6.1 million bpd by 2012 – exactly matching the expected demand growth. More than 70 percent of Asian demand growth will be in China and India, where the bulk of new refining capacity is also concentrated. But while Asia’s projects would be keeping pace with its own demand growth, this balance may be upset by more imminent and sharply rising imports from the Middle East. New refineries currently under construction or planned there could send another 1 million bpd of oil products into the Asian market. Saudi Arabia, Qatar, Kuwait, and the U.A.E. are expected to add 2.6 million bpd of new capacity by 2012, against Middle East demand growth of only 1.2 million bpd. The Middle East already accounts for the majority of Asia’s product imports. Additionally, the maturing European market has a growing surplus of gasoline and fuel oil, which is also likely to be exported to Asia over the medium to long term, especially as the U.S. product deficit reduces.