China caps refinery capacity under peak emissions plan

China will cap primary crude processing capacity at 20mn b/d by 2025, the government said in a new action plan to achieve peak emissions by 2030.

The plan, published by the state council today, gives a more detailed sector-by-sector breakdown following the release of an economy-wide plan for peak emissions and carbon neutrality on 24 October.

Major refining units should raise their utilization rate to more than 80 per cent, the state council said, without giving any further details.

China’s operational crude distillation unit (CDU) capacity was 17.8mn b/d at the end of 2020, according to state-controlled oil firm Sinopec’s research unit EDRI.

A total of 1.88mn b/d of new refining capacity and expansions are scheduled to come online over 2021-25, according to Argus’ calculations. This would take total capacity to around 19.7mn b/d, if all the units come online as planned.

Capacity additions include the private-sector 320,000 b/d Lianyungang refinery and state-controlled PetroChina’s 400,000 b/d Jieyang plant, which are scheduled to start up in 2021-22. Sinopec and fellow state-owned firm CNOOC are planning to expand their Zhenhai and Daxie refineries respectively by 2024, while Yulong, a 400,000 b/d refining complex backed by the Shandong government, could start up around 2024-25.

The state council also called for outdated petrochemical units to be phased out to help solve the problem of excess capacity. Stricter approvals should be put in place to control refinery expansions, it said.

The outright capacity cap comes after top economic planner the NDRC last week said China would continue to shut refineries smaller than 2mn t/yr (40,000 b/d) and ban new refineries with less than 10mn t/yr or 200,000 b/d of CDU capacity in the 2021-25 period. The targets are part of a separate action plan to curb emissions and energy use in key emissions-intensive sectors.

New refineries will only be approved on the condition that operators commit to phasing out a greater amount of existing capacity, the NDRC said.

Road transportation demand for petroleum products should peak before 2030, the state council said today.

Source: https://www.argusmedia.com/