February 29, 2024

China overtakes US as world’s largest refiner

As China began to ramp up its refining capacity throughout the pandemic, the US Energy Information Administration (EIA) published data showing that China processed more crude oil than the U.S. for much of 2020. 

While the USA suffered from a drop in demand throughout 2020, leading to a decrease in all oil-related activities, China benefited from this international shift. In contrast to the US, when oil prices fall, the Chinese government pays refiners to increase production levels.

China currently has at least four major new refineries under construction, most of which are expected to produce plastic feedstocks, such as ethylene and propylene.

While the US is likely to once again overtake China as the world’s biggest oil refiner by the end of 2021, long-term demand predictions mean it’s probable that this trend will be short-lived, as oil needs across Asia continue to rise.  

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Oil refineries across the US have been losing momentum in response to the Covid-19 pandemic. At the end of last year, Royal Dutch Shell Plc ground production at its Convent refinery in Louisiana to a halt. This same facility had 35 times the refining capacity of China when it opened in 1967, showing how dramatically the tables have turned over the past couple of decades. 

Oil refineries have also been impeded this year by the severe storm that hit the state of Texas in February. During the storm, oil refining fell to its lowest levels since 2008. This was largely due to frozen pipelines which forced producers to halt activities. Refinery crude runs fell by 2.6 million bpd throughout the week to 12.2 million bpd.

Meanwhile, in November, China was processing around 1.2 million bpd of crude oil. Much of this new refining work was taking place in the new unit at Rongsheng Petrochemical’s giant Zhejiang facility in northeast China.

China is not the only Asian giant to invest in refining over the next decade. Just a few weeks ago, India announced plan to invest $4.5 billion in a Panipat refinery expansion by September 2024. This would increase Panipat’s capacity by two-thirds to 500,000 bpd. 

Only slightly behind China, as the world’s third largest oil importer and consumer, India is striving to increase its oil refining capacity by 60% to meet the country’s increasing oil demand. This comes as Prime Minister Narendra Modi has pledged to improve India’s manufacturing sector. 

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The refinery expansion is expected to boost India’s production of petrochemicals and value-added specialty products, such as petrol, diesel, and ATF.

State-owned Indian Oil Corporation (IOC) has also announced plans to build a new refinery at Nagapattinam in the southern state of Tamil Nadu at a cost of $4.01 billion. The IOC subsidiary Chennai Petroleum Corporation Limited is expected to develop the refinery. The project is aimed at meeting the demand of petroleum products across southern India.

While US refining activities are expected to pick up before the end of the year, a dramatically increased oil refining capacity in China, as well as new projects in India, suggest that the face of the industry could change over the next decade. As oil demand wanes in the US and continues to increase across Asia, many Asian countries will be seeking out refined products from closer to home to meet their needs.

This article was originally published on Oilprice.com

Article source: https://www.rt.com/business/519246-china-overtakes-us-top-refiner/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

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