China Refined Oil Exports to Reach 60 Million Tons in 2020
Shenghong Petrochemical started the construction of its 16 million tons/a CDU on June 1, and it is the largest CDU in term of refining capacity of one single unit. The construction of the refinery is planned to be finished in 2019, and the refinery is scheduled to start production in 2021. Shenghong Petrochemical is designed to produce 5.9 million tons of gasoline and diesel, nearly the same as the production of Hengli Petrochemical. Hengli Petrochemical has supplied oil components to the market but had no gasoline or diesel for marketing. Meanwhile, the first phase of Zhejiang Petrochemical started production on May 20. In addition, some other new refining capacity are under construction and planning.
Most of the above projects are refining and chemical integration projects and will focus on the production of chemicals. But high refining capacity must lead to a large amount of gasoline, diesel and jet fuel. This will intensify the oversupply in China’s refined oil market.
China’s consumption of refined oil is in the new normal. The sales volume of conventional passenger cars is at a low level, and this is dragging down the gasoline consumption. China automobile sales volume was 28.08 million in 2018, down 2.8% from 2017. But the sales volume of new energy automobiles increased to over 1.25 million in 2018, up 61.7% from 2017. In 2019, it is predicted that the conventional automobile sales volume will be the same as that in 2018, while the sales volume of new energy automobile will reach 2.05 million. In addition, improvement in the fuel efficiency, promotion of ethanol gasoline and methanol gasoline will also take up some market shares of conventional gasoline.
In the meantime, stricter environmental protection policies and promotion of high-speed railway transportation are restricting the diesel consumption. China’s economy growth rate is slowing down, and this has become a new normal. According to governments’ planning, the railway freight volume will increase by 30% in 2020 from that in 2017. According to statistics, the railway freight volume in 2018 increased by 9.1% from 2017. Therefore, the promotion of railway transportation will also influence the diesel consumption.
At present, the export is an important solution to ease the oversupply of refined oil. In 2018, China’s refined oil exports reached over 45 million tons. In addition, the first two batches of refined oil export quotas reached over 50 million tons. Generally, the third batch and the fourth batch will not be at high levels. Therefore, it is projected that China’s refined oil export quotas will reach over 55 million tons in 2019. But unexpected changes may be seen in 2019. It is heard that Hengli Petrochemical is applying for jet fuel export quotas. If Hengli Petrochemical is guaranteed export quotas, China’s refined oil export quotas will be over 60 million tons in 2019.
But with the start-ups of emerging mega plants, some small refineries will be closed gradually. This will push up the upgrade of China’s oil refining industry. Besides private refining projects, state-owned refineries and foreign companies are also active occupy more shares in China’s refining industry. Therefore, how to find specific solutions will be important for refineries to survive in fiercer and fiercer market competition.
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