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PetroChina’s biggest refinery, a 410,000-bpd facility in Dalian, will resume operations in late June after a two-month overhaul, Reuters reports, citing a statement by the oil company.
This could mean an increase in Chinese oil imports from Russia because the Dalian facility is connected to the East Siberia-Pacific Ocean pipeline, and is the biggest processor of the ESPO blend, Reuters notes.
The restart of the Dalian refinery will add to rising run rates in the world’s top oil importer, which would likely be taken as good news for demand, no matter where the supply comes from.
There are already reports that Chinese refiners are ramping up their processing rates. In April, these rose by 11 percent from March as the country began to emerge from the months-long lockdown, reaching 13.1 million bpd. Also, the four-month average run rates for January to April were only moderately down on the year, suggesting that the industry did not suffer too severe a blow from the lockdown.
Now, refinery runs are expected to continue to rise as industrial activity in China recovers to normal levels. Capacity utilization rates at independent refiners rose to 73 percent last month, which was a record high. Meanwhile, at state refiners, utilization rates have increased to an average of 79 percent this month.
This means that fuel output will increase as well, in a market already quite well supplied with fuels, Reuters’ Clyde Russell wrote in a recent column. In April, Russell noted, Chinese fuel exports hit a record of 8 million tons, up 10.2 percent on the month and almost 30 percent on the year.
This would mean lower profit margins for an industry already struggling with these because the increase in fuel exports has been consistent for over a year. At the same time, processing capacity has been increasing, too. Last year alone, independent refiners in China added 900,000 bpd in new refinery capacity, and more is on the way over the next couple of years. Unless demand across Asia and beyond improves markedly, the refining industry in China may find itself in more trouble in tune with the ramp-up in fuel production and exports.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.