Regional report: East Asia’s refining industry

The Asia Pacific oil demand boom changed the centre of gravity in the global oil market. It led to a spectacular expansion of refinery capacity, often linked with investments in petrochemicals as well. The synergies between refining and petrochemicals boosted demand for petrochemical feedstocks. Expressions such as the ‘Four Little Dragons’ and the ‘Four Asian Tiger Economies’ were coined to describe Hong Kong, Singapore, South Korea, and Taiwan, because the rapid economic growth and industrialisation during the 1970s, 1980s and 1990s catapulted these countries into the ranks of developed, high income economies. East Asia can be viewed as the key birthplace of this phenomenon, not only because three of the Four Tiger economies are East Asian, but also because the Four Tigers invariably were compared to the economic success story of Japan. Although the Japanese economy has languished since the 1990s, still it remains the richest Asian country in per capita terms, and it is a global centre of technology and innovation. Moreover, the Four Tigers now are seen as setting an example for the ‘Four Tiger Cub Economies’ of Malaysia, Indonesia, Thailand and the Philippines. Thus, the venerable Tiger economy, Japan, has been followed by East Asia and, increasingly, Southeast Asia.

East Asian energy consumption trends

Within Asia, East Asia is by far the largest energy market, and Chinese demand growth has propelled the region into the forefront of the global energy picture. In 2009, East Asia accounted for 27% of global primary energy use.

Growth of LNG in East Asia

Japan led the way in terms of building its LNG infrastructure and becoming the world’s foremost LNG importer. Again, South Korea and Taiwan followed suit. With natural gas reserves so limited in the region, LNG offers the only large scale solution to expanding gas utilisation. The presence of the Japanese, South Korean, Taiwanese, and now Chinese LNG markets has given a major boost to the development of the LNG export capabilities of Asia Pacific sources such as Australia, Brunei, Indonesia, and Malaysia, and more distant sources in the Middle East, Africa, Europe and the Americas.

East Asian product demand

While the US remains the world’s largest oil market on a single country basis, East Asia as a whole now appears poised to overtake the US, most likely within the coming year if it has not done so already.

The shaping of East Asia’s refining industry

East Asia has transformed itself not only into a major energy market, it now is a centre of gravity in the world oil refining industry. The buildup has been remarkable in each of the four main countries, though the timing and emphasis has changed over time.

China

China now possesses Asia’s largest refining industry, with crude capacity of over 8.2 million bpd, not including a variety of small and independent refineries.

Japan

After decades of serving as Asia’s major centre of refining, the Japanese industry is waning and is dealing with overcapacity. Domestic demand has fallen significantly, and the author forecasts that the Japanese market will shrink by 1.5 million bpd between 1996 and 2010.

South Korea

South Korea hugely expanded its refining industry, yet in most cases refineries built up their crude capacity first and waited to invest in downstream technologies.

Taiwan

Taiwan has four main refining complexes, three run by the Chinese Petroleum Corporation (CPC) at Kaohsiung, Talin, and Taoyuan, plus a giant plant run by the Formosa Petrochemical Company at Yunlin, Mailiao. Crude capacity is currently 1.345 million bpd, with 745 000 bpd added between 1994 and 2009.

Conclusion

The four major East Asian refining countries, China, Japan, South Korea, and Taiwan, now constitute one the world’s key energy markets. The rise of Asia resulted in new expressions, including the Four Little Dragons, or the Four Asian Tigers. Japan, of course, was the venerable, original Dragon economy, and Hong Kong, South Korea, Taiwan, and Singapore were the little dragons industrialising and modernising into high income economies. The next wave is often called ‘The Tiger Cubs’, considered to include Thailand, Malaysia, Indonesia, and the Philippines, now working to modernise and develop their economies. East Asia was the fountainhead, and although the ups and downs of the world energy market have had varied impacts on China, Japan, South Korea, and Taiwan, all four must now be considered Energy Dragons.

The full article can be read in the October issue of Hydrocarbon Engineering.

Nancy Yamaguchi, Contributing Editor, Hydrocarbon Engineering

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/28092010/regional_report_east_asia%E2%80%99s_refining_industry/