April 11, 2018 / 8:48 AM / 2 years ago

Sinopec plans overhaul at largest refinery as it cuts Saudi oil

BEIJING (Reuters) - Sinopec Corp will shut down its largest refinery for maintenance throughout May, and at least four independent oil plants have started overhauls this month, curbing China’s crude oil demand.

FILE PHOTO: he company logo of China's Sinopec Corp is displayed at a news conference in Hong Kong, China March 26, 2018. REUTERS/Bobby Yip/File Photo

The news comes after Sinopec, China’s largest state refiner, announced big cuts in its Saudi oil imports.

Sinopec’s 460,000 barrels-per-day (bpd) Zhenhai Refining and Chemical Company will be shut down from May 1 for 40-day maintenance, in a major overhaul planned once every four years, an industry source briefed on the matter told Reuters on Wednesday.

The overhaul at Zhenhai, one of the country’s largest processors of Saudi crude oil, coincides with Sinopec’s decision on Tuesday to slash crude oil imports from Saudi Arabia during the month.

Four independent refineries with total processing capacity of 200,000 barrels per day (bpd) - Shandong Haiyou Petrochemical Group Co, Tianhong Chemical, Zhonghai Fine Chemicals and Rizhao Lanqiao Port Chemicals - are currently being shut down, according to Ding Xu, an analyst with Zibo Longzhong Information Group.

“Independent plants are battling with lower margins as crude oil prices went up, dampening demand for crude and leading to more maintenance plans,” said Ding.

A survey by Longzhong showed the utilisation ratio at 42 independent plants fell to 65 percent this week versus 67 percent in early January, Ding added.

A new tax rule that came into effect in March aimed at curbing alleged tax evasions by independents also limited smaller refiners’ appetite for crude, leading to brimming tanks and cargo congestion at Shandong ports late last month.

An official with Sinopec’s trading arm Unipec said on Tuesday the refiner planned to cut Saudi crude oil imports loading in May by 40 percent after Saudi Aramco set higher-than-expected official selling prices.

One of the reasons cited by a separate company official on Tuesday for the deep cuts was planned refinery maintenances. The official did not elaborate.

The Zhenhai plant will also shut down its 1.1 million tonnes-per-year ethylene complex during the same period for overhaul, said the source familiar with the repair works.

Sinopec media relation officials were not immediately available for comment.

Reporting by Chen Aizhu and Meng Meng; Editing by Mark Potter

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