Japan may cut its crude refining capacity be up to 10% by March 2017, under a new round of reductions set to be forced on the country’s refiners.
On Monday, the ministry outlined proposals that would mandate further cuts. According to a draft of the Ministry of Economy, Trade and Industry’s proposed rules, refiners will be required to increase the volume of high value fuels such as gasoline and diesel they produce in relation to the output of low quality byproducts by either renovating their facilities or reducing oil processing volumes.
The plan is to be released for public comment on Tuesday and refiners will have until 31 October to comment on how they would meet proposed cuts. The new targets may force them to cut approximately 400 000 bpd from the country’s current 3.95 million bpd capacity.
Reuters has highlighted that the proposed new rules are similar to a previous plan that required refineries to either scrap older crude units or invest in heavy residue crackers to produce more higher end, light products such as diesel and jet fuel. However, while the old rules only applied to cokers, residue fluid catalytic cracking (RFCC) units, and residue hydrocracking units (RHCU), the new measures would also include fluid catalytic cracking units (FCC), solvent de-asphalting units (SDA) and residue desulphurisation unit as residue cracking units.
Companies whose upgrading to distillation ratio is less than 45% will need to increase the proportion by 13% or more. Facilities with a ratio between 45 – 50% would be required to raise the proportion by at least 11%, and those with 55% or more would need to improve the ratio by at least 9%.
Refiners must decide whether to scrap crude units or invest in costly cracking facilities.
Yuji Nishiyama, JPMorgan Securities Japan Co. said: “As it is questionable if building such a unit makes sense amid declining demand, nobody would do it”.
Edited from various sources by Emma McAleavey.
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