Emerging Refining Plants to Bring More Oversupply of Refined Oil

In 2014, the National Development and Reform Commission issued the planning of the petrochemical industry. And the construction of the seven refining bases is an important target of the planning. According to planning, all of the seven refining bases are in the coastal regions and have the priority to accept the future newly added refining projects. The above map shows the location of the refining bases and main refining projects which are under construction and planning in the refining bases. All of the listed newly added capacity will be over 100 thousand barrels/day, and most of them are located in the seven refining and chemical bases. And according to the information of the newly coming refining projects, it is clear that large capacity and the integration of downstream and upstream will be the new features in China’s oil refining industry.

Next, six of the listed refining projects are chosen for detailed information introduction, including Hengli Petrochemical, Zhejiang Petrochemical, Tangshan Risun Petrochemical, Sinopec-KPC Petrochemical, Shenghong Petrochemical and PetroChina Guangdong Petrochemical.

Hengli Petrochemical is in Dalian and has the CDUs capacity of 20 million tons/a. It is an independent refinery, wholly owned by Hengli Group. Hengli Group is a leading producer of PX and chemical fiber, and the construction of Hengli Petrochemical is mainly for the feedstock supply of its downstream chemical and fiber units. The construction of the project started in December 2015, and all units were put into normal production in the middle of this May.

Zhejiang Petrochemical, which is 51% owned by Zhejiang Rongsheng Group, is building a 40 million tons/a refinery and associated petrochemical facilities. The CDUs of its first phase have been started production in February. Zhejiang Petrochemical received 4 million tons of crude oil import quotas for the first batch of 2019. In addition, it is said that Zhejiang Petrochemical is planning the third phase. If the third phase is added, the refinery will have the refining capacity of 60 million tons/a. Tangshan Risun Petrochemical is in Hebei Province. It is also an independent refining project. The 300 thousand barrels per day refinery is planned to be put into production in 2022. Sinopec is jointly building a refinery with Kuwait Petroleum Company in Guangdong Province. Shenghong Petrochemical is in Jiangsu Province, and it is also wholly owned by a private company, Shenghong Group. PetroChina is planning a refinery in Guangdong Province. The refinery was primarily planned to be jointly built by PetroChina and PDVSA many years ago. But after some changes in the project, it is confirmed to start production in 2021.

Of course, the new refineries will bring a large amount of products supply. The start-up of these six refining projects will bring over 415 thousand barrels of gasoline, 275 thousand barrels of diesel and 318 thousand barrels of jet fuel each day. But most of the projects are built by dominated chemical fiber groups, and China is already suffering oversupply of gasoline and diesel, so the new refining projects will have low yield rate of gasoline and diesel but high yield rates of PX and ethylene. China’s PX import dependence degree was over 60% in 2018, and around 60% of the imported PX was from Japan and South Korea. Accordingly, the central government is also encouraging the refining projects to produce more PX.

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