Skip to main content

Refinery rationalisation in Shandong Province

Published by , Senior Editor
Hydrocarbon Engineering,

China’s Shandong province is caving into the pressure to rationalise small independent refiners, reports ESAI Energy.

The province is retiring 500 000 bpd of capacity in 2020 - 2022 and another 500 000 bpd after 2022, according to ESAI Energy’s recently published ‘China Watch’.

These closures will blunt the impact of the country’s numerous petchem-oriented refining expansion on the country’s overall distillation capacity. As a result, distillation capacity will grow a net 400 000 bpd annually in 2021 and 2022.

As ESAI Energy’s report details, Shandong alone has 3.7 million bpd of distillation capacity and is home to most of China’s independent refiners. In the past, Shandong government protected its local refiners, but as Beijing has pledged to reach peak carbon emissions by 2030 and achieve carbon neutrality by 2060, steps have been made to accelerate refinery consolidation in that province. In addition, there is growing competition from new refinery-integrated petchem projects, which exacerbate the oversupply of transport fuels, squeezing the margins of Shandong’s fuel-oriented refineries. In response, Shandong announced that it would consolidate its refining industry by cutting one third of the province’s total capacity, or 1 million bpd, by 2025. Moreover, in the place of some of the rationalised capacity, Shandong is building a 400 000 bpd petchem-oriented refinery in Yulongdao. Construction started in late 2020 and probably will be completed in 2023.

“Shandong is a bellwether for rationalisation and expansion of Chinese refining”, explains Yao Wu at ESAI Energy. “While the focus is often on new projects and the growth capacity, there is also a rationalisation process well underway. Four of the nine refineries scheduled for closure were dismantled in 2020, and the rest will close in 2021 - 2022. Among other things, rationalisation in Shandong is evidence that Beijing’s long-term goals to limit carbon emissions are having a real impact on today’s market. But provincial authorities have also joined state oil companies and textile companies in the pursuit of petchem-oriented refining investment that is fuelling the expansion of refining activity, hoping to survive in the context of increasingly strict climate policies in China.”

Read the article online at:

You might also like


Embed article link: (copy the HTML code below):


This article has been tagged under the following:

Downstream news