China is about to become the country that possesses the most refining capacity in the world due to closures of refineries in the current number-one refiner, the United States.
“China is going to put another million barrels a day or more on the table in the next few years,” Steve Sawyer, director of refining at energy industry consultancy Facts Global Energy, told Bloomberg in an interview. “China will overtake the U.S. probably in the next year or two.”
Indeed, China has 1.4 million bpd in new refining capacity under construction. This amount, distributed among four refinery projects, will add to more than 1 million bpd in new capacity already added since last year. This means billions of dollars spent on refining capacity that may never come to be used as China works to shift to a more renewable energy mix and EV dominance.
Despite worries that this capacity will end up unused, especially with oil demand likely to stop growing in the observable future, China recently gave the go-ahead to yet another refining project: the Yulong refinery and petrochemicals complex in Shandong, the center of China’s independent refining industry. With a capacity of 400,000 bpd, the Yulong facility will cost some $20 billion.
Meanwhile, India is also building its domestic refining capacity. Over the next five years, the country plans to increase its current capacity twofold, Prime Minister Narendra Modi said on Saturday.
Currently, India has a refining capacity of 250 million tons, or a little more than 5 million bpd, based on a conversion factor of 7.33 barrels per metric ton of oil. Earlier plans envisaged this to be increased to 450-500 million tons over the next ten years. Now, the timeline has been squeezed tighter. Modi did not go into details as to why the move was necessary.
By Irina Slav for Oilprice.com
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Few years ago China’s economy overtook the United States’ to become the world’s largest based on purchasing power parity (PPP) and in 2013 China overtook the United States to become the world’s largest importer of crude oil. China’s GDP in 2020 at $29.5 trillion is almost 38% bigger than the United States’ at $21.44 trillion. In 2-3 years from now, China’s refining capacity is projected to overtake the United States’ as well.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London