Low Crude Oil Prices Postpone Elimination of China Independent Refineries
China’s GDP per capita reached over 10,000 USD in 2019, and that was a remarkable point in the development of China’s economy. With the start of opening-up reforms, the Chinese economy gained rapid growth especially from 2000 and 2015. In particular, after China was accepted by WTO, China began to play an important role in the global trading, and foreign investment also gave strong support to the domestic economic growth. But from the statistics, it is clear that China’s GDP growth rate is slowing down after 2015. The "demographic dividend" is slipping, and the international trading is facing fiercer competition. These are also influential factors of the crude oil refining industry, and the growth rate of China’s gasoline and diesel consumption is also slowing down.
In 2019, China’s gasoline and diesel consumption volume was 328 million mt with the year-on-year growth rate of 2.4%. The gasoline consumption increased by 2.8%, and the diesel consumption increased by 2.1%. But on the supply side, in 2019, China’s gasoline and diesel output growth rate was around 8.8% on a year-on-year basis. As of the end of 2019, China’s CDUs capacity reached 904.5 million mt/a. Therefore, China’s crude oil refining industry is confronting fiercer and fiercer oversupply of refined products.
China’s governments authorized the proposal of construction of seven large petrochemical bases in 2014. According to planning, China is scheduled to build seven world-class petrochemical bases in coastal regions. And this is regarded as an important practice of marketization reforms in China’s macro economy and oil refining industry. After many years’ extensive development, many small and out-of-date refineries cause high energy consumption, heavy environmental pollution and limit the modernization of the oil refining industry. Therefore, governments plan to support the construction of refining and chemical complexes, and the emerging large complexes will take up the small refineries’ market shares. China will realize the upgrading of oil refining industry through support of large complexes and elimination of small refineries.
