This should be interesting – Sinopec is going to have 8 of its state owned refineries prepare to export refined oil products starting March 2009 because the new capacity is coming online in midst of bulging inventories & collapsed domestic demand. <A similar push is already underway from India & newly doubled Reliance Refinery (with coker addition) already looking at all 3 US coast for storage of import fuels.>
This additional 1 MM BPD capacity will put lot pressure on prices of fuels imports (just as any Chinese driven export program has – coal & steel as examples) and normal market suppliers. And the Chinese program may have some problems since most of the target export markets (like the US) are full of product importers that already have bulging inventories & a collapsed demand of their own (neither of which bode well for WW refinery margins).
Perhaps this will finally move world to action against the large annual subsidies (since 2001) the Chinese Government has been giving to its state owned refineries to offset their losses for purchasing 30-40% of import crude from the market but controlling domestic fuel prices at less than $0.90/gallon. This is completely unfair to free market and outside of the WTO program – along with pegging its currency below US dollar.
And although it will still require subsidy the market export prices to US Gasoline & Europe Diesel will still be higher than the controlled $0.9/gallon or idled capacity cost of new plants. Many of the new Sinopec export planned refineries are complex plants that have recent new or expanded cokers (Maoming, Guangzhou, Jinling, Qingdao & Zhenhai).