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Large Chinese Refiner Starts Construction Of 320,000 Bpd Complex

Shenghong Group started to build a 16 million mt/yr (320,000 bbl/day) crude distillation unit (CDU) and some other units in Jiangsu province on June 1, which indicated that the company launched the full-scale construction of its new refinery.

This is the largest CDU in China.

The company also began construction of a 3.10 million mt/yr continuous reform, a coal gasification unit and some other units on the day in east China's Lianyungang city, the company said.

Shenghong's 320,000 bbl/day refinery will be another large private refining-chemical one in China, following Hengli Petrochemical and Zhejiang Petrochemical. The refinery, scheduled to come online in 2021, will produce a total of about 5.90 million mt of gasoline and diesel per year when it runs at full capacity.

Increasing supply when demand lags behind will intensify competition in the domestic market which is already oversupplied. Refineries with a total capacity of 5.08 million bbl/day are scheduled to come on stream during 2019-2024 according to recent JLC data. Hengli Petrochemical and Zhejiang Petrochemical expect to start supplying gasoline and diesel in the second half of 2019, to be followed by more refineries in the coming years.

On the demand front, gasoline demand growth has been slowing as a direct result of disappointing car sales in China. A total of 28.08 million conventional cars were sold in 2018, a decline of 2.8% from the previous year, according to industry data. Meanwhile, the sales of ‘new energy vehicles’, such as EVs and hybrids saw a 61.7% jump year on year. The sales of conventional cars are expected to stabilize in 2019, while those of new energy cars will jump further.

In addition, gasoline demand will be impacted further by alternative energy such as ethanol gasoline and methanol gasoline.

And it’s not just gasoline, diesel demand is under pressure because of slowing economic growth, the country's supply-side reform, and stricter environmental regulation that constrains industrial activities.

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As the glut of refined products continues to grow, China is set to boost oil product exports significantly this year.

By JLC International

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