March 18, 2019 / 8:21 AM / 3 months ago

China refiners eye record crude use in Q3, likely yielding fuel glut -survey

    * Refinery overhauls expected to remove 157,000 bpd of
capacity 
    * Refiners see fuel glut worsening in Q3; some say may cut
runs 
    * Two new mega-refineries to be in full operation by Q3 

    BEIJING/SINGAPORE, March 18 (Reuters) - 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.) 
      
 Name                   CDU capacity   Maintenance    Affected
                                           period        units
 SINOPEC     JINLING         360,000   March-April     160,000
                                                       bpd CDU
             YANGZI          250,000      Unknown    Secondary
                                                        units 
             GUANGZHOU       264,000  60 days from  104,000-bp
                                             Oct 8       d CDU
             QINGDAO          70,000  From May for   All units
                                           unknown  
                                           period   
             ZHANJIANG       100,000  From mid-May   All units
             DONGXING                 for 15 days   
 PETROCHINA  JINZHOU         140,000   From May to   All units
                                             June   
             WEPEC           200,000    From April   All units
                                           to May   
             LIAOYANG        200,000   From June 1   All units
                                       for unknown  
                                           period   
 CNOOC       HUIZHOU         240,000     From late   All units
                                      February for  
                                           50 days  
    (1 tonne of oil products=8 barrels) 

 (Reporting by Meng Meng in BEIJING and Chen Aizhu in SINGAPORE;
Editing by Henning Gloystein and Tom Hogue)
  
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