BEIJING Jan 9 China's top oil refineries and
major new plants will supply an additional 400,000 barrels per
day (bpd) of fuel to the world's second-biggest consumer this
year, more than double last year's rise, a Reuters survey
While that growth is nearly equal to the forecast increase
in demand, China may be forced to continue importing extra
supplies right up until the Olympics this summer as several key
facilities will be commissioned only in the latter half of the
China has taken a measured approach to expanding its
refining sector, pushing its big state oil firms such as
Sinopec (0386.HK) to build enough new plants to meet
fast-growing domestic demand while cautioning against excessive
expansion -- in contrast to the surge in export-oriented
investment in India and the Gulf.
The risks of that policy showed last autumn, when regional
fuel shortages spread as far as the capital city, causing
China's worst supply crisis in four years as the dozens of
semi-official "teapot" refineries shut down due to soaring
The new refineries due on stream this year -- including the
first major project by offshore oil producer CNOOC (0883.HK),
as well as a venture with Exxon Mobil Corp (XOM.N) and Saudi
Aramco -- are the result of projects planned in the wake of
China's demand spurt in 2004, when global oil markets awoke to
Another 16 plants, making up about half of the country's
total refining capacity, will process an additional 220,000 bpd
of crude this year, with increases mostly from newly revamped
plants in Beijing and Shanghai, the survey of industry
officials and company sources showed.
For a Table on 2008 refinery runs click on: [ID:nSP87132]
For spot news on Chinese refinery operations: [O/CNREFINE]
This year's growth marks an improvement on a particularly
weak 2007, when a scant 190,000 bpd of increased supply fell
far short of incremental demand, which the International Energy
Agency (IEA) estimates at 370,000 bpd.
The IEA's latest forecast puts China's oil demand growth at
430,000 bpd this year, about one-fifth of the global increase.
"The general assessment is that the new capacities can
cover demand growth. We are more concerned with the pressure on
logistics to handle a surge in crude imports," said a Sinopec
official. China, a net exporter some 13 years ago, is near to
overtaking Japan as the world's second-biggest crude importer.
With August's Olympics in Beijing seen as a historic moment
to showcase its growing clout, China will make sure that its
refiners provide enough fuel to make the event a success,
regardless of the losses they face when producing or importing
fuel sold on the domestic market, where prices are kept low.
That would mean China, which is importing near record
volumes of diesel in January and has slashed gasoline exports,
could extend strong fuel imports into the second quarter,
"If crude price beyond the first quarter continue to rise
rapidly, that might result in renewal of local shortfalls in
China if domestic prices fail to keep pace," said John Russel
of oil consultancy KBC Market services.
While scant new refining capacity in 2007 was partly to
blame for the supply squeeze late last year, China will do
better in 2008 with four new refineries -- Sinopec's Qingdao
and Fujian, CNOOC's Huizhou and PetroChina's (0857.HK)
While those facilities will eventually pump a combined
700,000 bpd, most of that will not be felt until the second
half of the year, nearly two years after China commissioned its
last greenfield plant, the Hainan refinery in August 2006.
Following a one-year delay to the 100,000-bpd Dushanzi
plant in the remote northwest due to severe weather and
equipment delays, Sinopec's 200,000-bpd Qingdao plant in
eastern Shandong province should be the first new plant of the
year in March.
CNOOC's first oil refinery, the 240,000-bpd Huizhou plant
in the booming southeastern province of Guangdong, is keeping
to its target to start in October.
And Sinopec's 160,000-bpd Fujian plant in the southeast
coast -- the joint ExxonMobil/Saudi venture more than 12 years
in the making -- may start operations in the fourth quarter,
sources have said.
To stave off supply crunch, which led to widespread diesel
rationing last year, Beijing has waived a 17 percent value
added tax on fuel imports through March and halved the import
duty to 1 percent, rather than risk increasing already high
inflation by raising fuel prices to match nearly $100 crude
(Editing by Jonathan Leff and Ramthan Hussain)