By Malini Hariharan
Yesterday's post talked about refining capacity additions in China and India over the next few of years and how this will contribute to weak refining margins across the region.
The blog obtained a preview of a presentation being made by Liao Na, information director of C1 Energy, at a China oil and refining seminar being held in Dubai today, which offers more details on where the industry is heading.
Liao Na expects refinery capacity expansions in the country to peak in 2013 with nearly 1400 kbd of capacity added that year.
While demand growth for refined products will be around 3%/year, capacity expansions will be in excess of 10%/year during 2012-15. China is therefore poised to emerge as a big exporter of gasoline, gasoil and liquefied petroleum gas (LPG) in the coming years.
There are two possible scenarios for naphtha. In the first case, China would have a balanced naphtha position if it imports condensate (10-15m tonnes annually) for use at petrochemical facilities. Some condensate is already being imported but it remains to be seen if volumes will grow.
But if condensate imports do not take place, the country would need to import at least 5m tonnes of naphtha in 2015 to meet growing requirement from new crackers and paraxylene (PX) plants.
Meanwhile, the projected surplus for refined products has not deterred international refiners such as Kuwait Petroleum and Rosneft from queuing up to establish new projects in China.
At the same time Chinese majors are moving overseas. Sinopec is partnering with Saudi Aramco for a refinery at Yanbu and is also in talks for a joint venture refinery in Ecuador. And PetroChina has already acquired a refinery presence in Europe via its stake in Ineos.
Overseas investments extend upstream (oil and gas production) and also involve pipelines.
Energy security and political considerations are obviously behind this push to expand overseas.
But importantly, Chinese companies will have more platforms to play the international oil trading game, points out Liao Na. And having a bigger say in the international refined products market makes sense give the surplus capacity being built up in the country.