Beijing April 15 2022: China’s refining capacity is expected to hit 937 million mt/year, or 18.81 million b/d, overtaking the US to become the world’s top refiner in 2022, the country’s oil giant CNPC’s Economics & Technology Research Institute said on April 12.
At the same time, the refining sector is facing the headwind of high feedstock prices amid the Russia-Ukraine conflict, while the resurgence of COVID-19 dampens domestic oil demand this year.
Adding to the rising market share of new energy vehicles, or NEV, China’ oil demand peak would arrive earlier than expected, experts said during ETRI’s report release.
The country’s refining capacity is expected to rise by around 25.6 million mt/year in 2022, mainly due to PetroChina’s new Guangdong Petrochemical with a capacity of 20 million mt/year and Sinopec Hainan Petrochemical’s 5 million mt/year expansion, which are to be delivered this year, Wang Jing, senior economist with ETRI said.
Meanwhile, three independent refineries in Shandong province with a combined 7.4 million mt/year capacity will be mothballed. These refineries are: 3 million mt/year Chengda New Energy, the 2.2 million mt/year Haike Petrochemical and the 2.2 million mt/year Kelida Petrochemical.
These private refineries hold a total of 4.56 million mt/year of crude import quotas, which will be transferred to the under-construction integrated 20 million mt/year Yulong Petrochemical, according to the province’s refining capacity consolidation plan.
China has speeded up the phasing out of inefficient refining capacities and consolidation of the small-scale private refining sector by tightening supervision of their operations and tax collection. As a result, the proportion of the sector has fallen to 21% of China’s refining capacity in 2021 from 23% in 2019, while the share of integrated private complexes rose to 8% from 5% in the same period, Wang said.
“Not only the inefficient capacities from the independent sector are needed to be ruled out, but also those in the state-run sector, to keep the competitive ones,” Ke Xiaoming, a senior expert with Sinopec’s Economics & Development Research Institute, said during a panel discussion of the release.
China is aiming to cap the country’s primary refining capacity at 1 billion mt/year, or 20 million b/d, by 2025 while boosting utilization rates of its refining facilities to above 80%, according to the national carbon peaking action plan released by the State Council in October.
Moreover, a severe market environment would be an opportunity to phase out capacity, Ke added.
