China’s private refineries in Shandong to maintain minimum throughput amid electricity rationing: sources

Strong points

Units closed due to power rationing mandate

September flow probable at 9.5 million tonnes

Allocation of crude import quotas will likely be reduced, delayed

China’s independent refineries in Shandong are expected to keep crude throughput to a minimum in the short term in order to comply with the provincial government’s latest energy conservation mandate, which will put pressure on crude oil demand and imports. of the sector. Platts on September 29.

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More than a dozen Chinese provinces have imposed an electricity rationing mandate on critical industrial sectors in recent weeks, in an effort to save fuel ahead of the peak heating season and winter electricity demand. , while higher prices for coal and gas have limited power generation capacity. Electricity rationing measures were also aimed at getting industries to meet energy consumption targets by the end of the year.

Shandong, home to China’s small independent refineries, is one of the provinces that has imposed electricity rationing.

Zibo and Dongying refiners said they had to shut down some of their secondary units from time to time due to the low voltage of the power supply.

A Dongying-based refiner, which recently restarted after maintenance, had to reduce its daily throughput from around 1,000 to 2,000 mt to around 10,000 mt due to the power shortage.

“Some of the cooling boilers have to be turned off due to the power shortage, which limits the production of petroleum products to some extent,” another source from the Dongying-based refinery said.

In addition to the impact of electricity rationing, Fuyu Petrochemical has completely closed its 2.2 million t / year units to transfer its capacity to the consolidated 20 million t / year group Yulong Petrochemical, which is expected to enter into service in 2022.

The 3.5 million tonne / year Haiyou Petrochemical had to shut down its units just weeks after it restarted maintenance, due to the month-long environmental survey conducted by the government since August 26.

Decreasing use

As a result, the average weekly refinery utilization rate fell to 64.8% on September 22 from 66.3% in the first week of September, local news provider JLC’s survey of 43 refineries showed.

At the same time, their throughput is not expected to recover in September from the 17-month low of 9.45 million tm in August despite the resumption of operations at the Lianhe Petrochemical plants of 4.2 million t / year and 2.3 million t / year of Ruilin Petrochemical, refining sources mentioned.

“They are unlikely to increase crude throughputs at any time this year,” said a JLC analyst.

The throughput cuts came a little earlier than in previous years, continuing the trend from late August, when refineries cut back on crude quantities during a month-long environmental inspection.

Typically, private refineries in Shandong have only slightly reduced their daily throughputs during National Day October 1-7 to offset product inventory pressure in factories when transportation restrictions are enforced to limit their logistics. sale of petroleum products.

Quota allocation pending

Meanwhile, “the recent rationing of electricity and mandates to reduce energy consumption have also led to more suspicion of a reduction in the next round of crude import quota allocations, or to a postponement of the allocation to mid-October, “said another source.

Independent refineries struggled due to the shortage of import quotas, which also limited their throughput due to limited raw materials.

The people concerned do not only understand the refiners in Shandong. Integrated company Zhejiang Petroleum & Chemical in Zhejiang Province also closed its third 10 million ton / year CDU in the week ending September 24 due to a shortage of raw materials and the government’s mandate. provincial to reduce energy consumption.

Refiners expected the fourth round of quotas to be allocated in September.

It was generally expected that at least 19.8 million tonnes of allowances would be allocated in the last cycle, as at least 18 independent refineries needed to get their remaining 13.3 million tonnes quotas. In addition to this, around 6.5 million tonnes of allowances were expected for the ZPC phase 2 project and for the 16 million t / year of Shenghong Petrochemical in Jiangsu province, split between 4.5 million t and 2 million t, respectively, Platts reported earlier.

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