Asia’s refinery delays can only help with oil glut

The views and opinions expressed in this blog are those of the author’s and do not necessarily reflect the official policy or position of Hydrocarbon Processing.

Seeing the startup of a refinery project delayed usually has a negative connotation, but the announcement of several Asian refinery delays, will allow OPEC producers, and leading providers to Asia, Saudia Arabia and Russia to extend output cuts, giving some relief to the oil glut the industry is still facing.

Crude oil imports

While crude oil imports to China have continued to increase since the beginning of 2017, with a record high of 9.17 MMbpd, April imports slowed down, dropping 9% from March to 8.37 MMbpd.

Attributing partly to the lower number in April is that several major refineries kicked off their annual maintenance and turnaround periods. Also contributing, is in China, a number of independent refineries—teapots—have run out of import permits issued at the beginning of the year. China’s top slate planner stopped accepting new applications from oil refiners to use imported crude oil on May 5. Teapots make up 12% of the country’s total crude imports, according to the China Petroleum and Chemical Industry Federation.

Refinery delays

PetroVietnam said on May 15 that the commercial star-up of their new 200 Mbpd refinery, Nghi Son, will be delayed to 2018. Trouble with a mechanical test on some of the refinery’s components set back test runs at the plant, causing the delay. Nghi Son refinery was originally scheduled to receives its first delivery of crude oil in May.

In China, CNOOC’s Huizhou refinery delayed its 200-Mbpd expansion project, which planned for start-up around May or June.

Light crude

Asia is also turning to the US, importing more light crude, which could cause a major battle among producers, as Saudi Aramco is also supplying additional volumes of light crude, despite cutting exports of healthier grades.

These delays, and drop in demand, is only temporary. By the second half of 2017, Asia demand will increase once again, including new outlets for the crude oil like PetroChina’s Yunnan refinery, which is receiving crude via a pipeline from Myanmar. The refinery is expected to start trial runs in June. Also, Norinco and Saudi Aramco have recently signed a framework agreement for a 300-Mpd refinery and chemicals complex to be built in northeast China.

In the game of supply and demand, as long as Asia continues to increase their demand, OPEC and non-OPEC countries alike will continue to supply them. But hopefully these brief moments of demand drops, allow give the industry relief.

The Author



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