China refiners eye record crude use in Q3
China's crude oil processing rate will likely hit another record in the third quarter this year, topping 13 million barrels per day (bpd) for the first time, as two new mega-refineries ramp up and others exit maintenance, a survey of 20 refiners showed.
Crude use in China, the world's biggest importer, rose 6.1 percent from a year earlier to a record 12.68 million bpd in the first two months of 2019, official data showed last week. But demand is first likely to dip in the second quarter, as more than half-a-dozen Chinese state-owned refineries go into maintenance or upgrading shutdowns during the period of typically low demand.
The eight planned overhauls are expected to remove close to 157,000 bpd of crude throughput on average if spread evenly across the course of the year, up from just over 124,000 bpd in 2018, Reuters calculations showed.
Crude runs will rebound by September, though, when the new refineries of Dalian-based Hengli Petrochemical Co Ltd and Zhoushan-based Zhejiang Petrochemical are both expected to be at full capacity, according to the survey.
The 400,000-bpd Hengli Petrochemicals refinery is poised to have all units operational and running at full capacity by end of March. A full trial operation of Zhejiang Petrochemicals Corp, also with 400,000 bpd capacity, is expected in the second quarter this year, according to a Reuters report. Adding so much capacity to China's already huge refining sector will likely weigh on profits for gasoline and diesel.
A manager at Sinopec's Maoming Petrochemical, one of the largest refineries in China, said the plant may have to cut down on transportation fuels in response. "There will definitely be competition," said Ma Yongsheng, president of Sinopec Corp, on the sidelines of China's annual parliament meeting in Beijing. "But we will be shifting more focus from refining to downstream chemicals," Ma said. Li Xiangping, who heads Chinese private refiner Dongming Petrochemicals, said his company was applying for approval to build an ethylene plant to avoid head-to-head competition with the two new refineries in the transport fuel market.
Another way to avoid China's domestic fuel glut is to export refined products. China's oil product exports hit a record in 2018, and are still going strong this year.
PetroChina's WEPEC shipped three gasoline cargoes to Mexico since the beginning of this year, a direct source with knowledge of the matter said, not specifying the amount shipped. "We are deep in the refined products glut, and in the second half it could be even worse.
There is so much pressure to sell middle distillates," an executive from the Dalian-based WEPEC refinery said, asking not to be named. In January, China National Petroleum Corp's think tank forecast that China will export at least 48.6 million tonnes (about 1.07 million bpd) of gasoline, diesel and kerosene this year to offset excesses in the domestic market. (Capacities in the table below are given in barrels per day, or bpd. CDU stands for crude distillation unit.)
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