Siyi Liu and Chen Aizhu, Reuters

BEIJING/SINGAPORE
EnergiesNet.com 10 25 2023

China has set a minimum size for new oil refineries and will ban small crude processors that claim to be chemicals or bitumen producers under its plan to limit total capacity at 1 billion metric tons by 2025, its state planner said on Wednesday.

China, the world’s top crude oil importer, first unveiled the cap of 1 billion tons, or 20 million barrels per day (bpd), two years ago, in an effort to streamline its sprawling refining industry and curb carbon emissions.

Capacity increased last year to 920 million tonnes per year, or 18.4 million bpd, overtaking the United States for the first time and enabling large volumes of diesel and other refined products to be exported.

The policy is likely to see Beijing tighten approval of new refineries and favour expansion and revamping of existing plants operated by major players such as state refiners, as well as those integrated with petrochemicals production, said an expert.

The measures, together with a slowdown in the Chinese economy and domestic fuel demand, are also expected to prompt independent refiners to look overseas to build new plants.

The National Development and Reform Commission (NDRC) said it would limit new refining capacity, promote upgrading and optimisation, and speed the closure of less competitive refineries, according to a statement dated Oct. 10 posted on its website on Wednesday.

“This reflects government’s intention to restrain some local governments’ desire to add big-ticket manufacturing capacity, primarily in refining and power generation, to help lift a sagging economy,” said Wang Nengquan, independent researcher and former chief economist at Sinochem Energy Co.

Refineries with annual capacity of at least 10 million metric tons will account for 55% of facilities by 2025, the notice said, and any new refineries will have to have at least that capacity.

Authorities will audit plants’ capacities, crude oil sources and energy efficiency, and build a national database, the NDRC said.

Smaller oil facilities that claim to be bitumen producers or are used to process heavy oil and chemicals will be banned. New refineries will also be sited close to or integrated with petrochemical plants making products such as ethylene and paraxylene.

The NDRC said it would continue its decades-long effort to close plants smaller than 40,000 bpd, the real “teapot” refineries, although industry sources say these are now scarce as many have quietly expanded to become more competitive.

Small independent refiners, including some bitumen-focused plants, have in recent years profited from processing discounted oil from Venezuela, Iran and more recently Russia.

New capacity being added now include the greenfield 400,000-bpd Yulong refinery in Shandong province and the 300,000-bpd expansion at Sinopec Zhenhai refinery.

Reporting by Siyi Liu and Dominique Patton in Beijing and Chen Aizhu in Singapore; Editing by Edwina Gibbs, Tom Hogue and Kevin Liffey

reuters.com 101 25 2023