February 25, 2009 at 3:28 pm #3174
Sinopec ask 8 plants to ready for fuel export-paper
Reuters, BEIJING, Feb 25, 2009 – Sinopec Group has asked eight of its refineries to prepare for exports of refined oil products in March, a Chinese newspaper reported on Wednesday, suggesting its concerns over a domestic fuel surplus at a time of more capacity coming online and sluggish demand.
The refineries include its largest Zhenhai, second-largest Maoming, Guangzhou, Jinling, Gaoqiao, Hainan, Dongxing and Qingdao, the Oriental Morning Post said, citing a recent notice by the group.
The plants have crude capacity of around 100 million tonnes a year, or 2 million barrels per day, but only the 160,000 bpd Hainan refinery is a regular fuel exporter.
The report did not give a reason for Sinopec’s instruction, and no company spokesman was immediately available for comment. Gasoline and diesel exports in March are expected to increase to 350,000 – 400,000 tonnes, the newspaper report said, citing an industry analyst.
Sinopec Group, Asia’s top refiner, is the parent of Sinopec Corp. Almost all Sinopec Group’s refineries are operated by listed Sinopec Corp. China’s state-owned refiners will likely add nearly 1 million bpd of new capacity by year-end as some facilities are set to start running after repeated dalays in the past year partly due to worsening refining margins.
Faced with bulging inventories and a collapse in domestic demand growth, Sinopec and PetroChina are clamouring for relief on export curbs in order to step up output from new plants that were planned years ago, when consumption was growing by leaps and bounds.
Gasoline exports surged 243 percent from a year earlier to 217,814 tonnes in January while diesel exports soared 496 percent to 133,596 tonnes, customs data showed, as fuel stockpiling was at record highs while domestic demand slumped on economic downturns.
February 25, 2009 at 3:31 pm #6218
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).
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