27 December 2011 06:42 [Source: ICIS news]
By Li Li
The country is expected to add 35-36m tonnes/year in refining capacity next year, representing a 3% increase from 2011 and a marked deceleration from the annual capacity growth of 11-12% in the past five years, based on results of a survey conducted by C1 Energy, an ICIS service in
The incremental capacity in 2012 includes PetroChina’s 10m tonne/year project in
By the end of 2011,
Excluding China’s 112 independent refiners that have no steady crude source that make their operating rates unstable, the country’s state-run major refineries are projected to have a total capacity of about 516m tonnes/year by the end of the year, up 3% from 2010.
A sizeable chunk of the growth in refining capacity this year came from the independent refiners but these may not add to actual crude throughput given their persistent problems with securing feedstock and in coping with refining losses.
“There may be still limited expansions in 2012, as 2009-2010 appeared to be weak years for investment and construction in refining industry after [the] global financial crisis,” said a researcher at the economic and development research institution under China’s energy major Sinopec.
“In the past two to three years, there were hot talks on China’s refining capacity surplus, export outlet and capacity control, resulting [in] limited expansion emerging in 2012,” said a source at one of Sinopec’s coastal refinery.
The country is expected to bring on stream 52.5m tonnes/year of new capacity in 2013, more than double the projections for next year, according to C1 Energy’s survey.
For the years 2014-2015, the refining capacity is forecast to grow at an annual rate of more than 40m tonnes/year based on the projects currently in the pipeline.
CNOOC and Sinochem are expected to strengthen their shares in the Chinese refining industry in 2011-2015. Over this five-year period, PetroChina will be starting up its refining projects at
Independent refineries will see heavy capacity expansions over the next three years
From 2012 to 2015, China is estimated to report an annual increase in crude throughput of 5.0%.
Domestic refineries will likely run at high operating rates despite an almost negative refining margins.
Based on C1 Energy’s calculations, Chinese major refiners can only breakeven with their production cost if crude prices hit US$140/bbl, under the current pricing mechanism in place in the country.
China regulates its domestic fuel prices and adjusts when crude values in the international market moves beyond the 4% threshold over a 22-day period, but this pricing scheme could be adjusted in 2012.
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