Page 6 - AsianOil Week 42

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Chinese run rates set new high on expanding capacity
Additional privately owned refining capacity helped to lift China’s crude processing volumes to a new monthly high in September
COMMENTARY
WHAT:
Refinery runs hit 13.8mn bpd in September.
WHY:
ZPC and Hengli Petrochemical both launched new mega facilities.
WHAT NEXT:
The short-term outlook is cloudy, with margins under pressure.
CHINA’S downstream has set a new monthly oil processing record, on the back of rising privately owned refining capacity and expanding crude import quotas.
Refinery runs grew by 9.4% year on year to 56.49mn tonnes (13.8mn barrels per day) in September, according to National Bureau of Sta- tistics (NBS) data published on October 18. The figure beat the previous record of 53.7mn tonnes (13.12mn bpd) set in June. The country’s refiners processed 480.38mn tonnes (12.9mn bpd) in the first nine months of the year, a 6.2% y/y increase.
The private sector has brought two mega facilities on stream in the last year, contributing 800,000 bpd of refining capacity to the national total. Both Zhejiang Petroleum & Chemical (ZPC) and Hengli Petrochemical have launched 400,000 bpd facilities in pursuit of economies of scale and to compete more effectively against their state-run rivals.
As a result, the central government has increased crude oil import quotas for the private sector. Reuters reported on October 22, citing an official document, that a third round of quotas had awarded 12.9mn tonnes (94.56mn barrels) to 19 companies, the majority of which were privately owned. This brought the year’s total to 166mn tonnes (1.22bn barrels).
The country imported 369mn tonnes (9.91mn bpd) of crude oil in the first nine months of 2019, up almost 10% y/y. National
crude production, meanwhile, rose just 1.2% y/y in the period to 143.13mn tonnes (3.84mn bpd).
ZPC expands
Leading the latest batch of awards, according to Reuters, was ZPC – which received an allowance to import another 3.5mn tonnes (25.66mn bar- rels) of oil this year. The new quota came hot on the heels of the Ministry of Commerce’s Octo- ber 14 award of a crude import licence to ZPC. Reuters quoted an unnamed local government official at the time as saying the newly awarded licence would be attached to an unspecified import quota.
The licence allows ZPC, which is a joint ven- ture led by privately owned Rongsheng Petro- chemical, to import crude directly for its refinery and petrochemical plant in Zhejiang Province’s Zhoushan City. Without the licence, ZPC would have had to rely on imports from another refin- ery or a trading company. There had been some speculation that the company might have turned to state-run Zhejiang Petroleum Trading, in which it holds an indirect stake.
ZPC owns a stake in provincial govern- ment-led Zhejiang Petroleum, which in turn owns 71% of Zhejiang Petroleum Trading. The remining 29% is owned by international com- modity trader Glencore.
The expanded quotas will help feed ZPC’s sec- ond 200,000 bpd crude distillation unit (CDU),
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The rise of China's downstream ™
Crude processing capacity
Data source: BP, CNPC
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w w w . N E W S B A S E . c o m Week 42 23•October•2019
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