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CNPC to develop Xinjiang oil processing capacity

Monday, August 16th, 2010

The following story comes from The Peoples Daily, here in China.    This is part of a long-term shift from the east to the west, and could have important ramifications for exporters looking to buy from China.    This announcement presumably means increased coking capacity in the far west, just at a time when the China aluminium industry is also moving west.   Most of the new smelters being built in China are going in the west or south west.

This means that, apart from the Russians, most of us who are looking to buy pet coke from China may find that the inland logistics costs make Chinese coke even more problematic than it already is.   Of course there are plenty of railway lines, but they are busy running coal to the East Coast.

In the next 10 years, the China National Petroleum Corporation (CNPC) will build Xinjiang into China’s largest oil and gas production base, according to Wang Yilin, deputy general manager of CNPC, China’s largest state-owned integrated oil and gas producer.

The region will also serve as and oil and gas reserve base, an important petrochemical base, engineering services support base and an important channel for importing foreign oil and gas resources.

Wang said that CNPC will continue to increase investments and policy support in order to develop the oil and gas production of Xinjiang oil fields to 20 million tons per year, improve the amount of refined oil of Karamay Petrochemical Company to 10 million tons and maintain oil refining and ethylene production in the Dushanzi Petrochemical Company at levels of 10 million tons and 1 million tons, respectively.

The CNPC has accelerated the exploration and exploitation of oil and gas resources in Xinjiang since 2010 and in particular, a number of major projects were launched in July.

On July 14, the CNPC Tarim Large Chemical Fertilizer Project in Korla was completed and put into operation. It utilizes modern chemical fertilizer equipment with the largest land-based single-set production capacity in China and has investments totaling 3 billion yuan.

On July 19, the CNPC Urumqi Petrochemical Company xylene aromatics joint device was completed and tested. It is a 1-million-ton level xylene aromatics joint device, which has the largest single series in the world and investments in it total 3.7 billion yuan.

At the same time, the CNPC South Xinjiang Gasification Project, which officially began construction in Kashgar on July 14, has attracted much attention, and it is expected that in the next two or three years, the pipeline network will cover Kashgar, Hetian and Kizilsu Kirghiz Autonomous Prefecture, involving 25 county-level cities and 21 ranches.

The Xinjiang region has been occupying an important position in the strategy of the CNPC. In the past 30 years, the CNPC had invested over 300 billion yuan in Xinjiang, creating a production capacity of 18 million tons of crude oil, 23 billion cubic meters of natural gas, 12 million tons of ethylene and 20 million tons of crude oil refining capacity every year.

By the end of 2009, the proven oil deposit and natural gas reserves in Xinjiang stood at 3 billion tons and 1.3 trillion cubic meters, respectively.

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Gaoqiao expands

Thursday, August 5th, 2010

Those of you who know the China pet coke market will know the historical importance of Gaoqiao refinery.   Located near Shanghai, Gaoqiao was the source of a large proportion of the coke that ended up in exported anodes and calcined coke. 

In 2006, that all changed (or so many people thought).   Sinopec shut the refinery down for overhauls, and to convert it to run more sour crude oils.   This was in response to the widening net that China was casting in its thirst for crude oil.   Many people at the time predicted that the price increases that we saw in 2007 and 2008 were due in part to the relative shortage of anode grade coke.

Problem with that theory is that Gaoqiao coke is marketed and used as a blend stock by most of the producers in the Nanjing region.   Although it’s true that sulphur levels are now higher that they were (from 2 – 2.5% to 4 – 4.5%), the reasonable metals and good structure make this a great coke for blending down the cost price.

This article is from Reuters.

Sinopec Corp. plans to raise crude processing at its Gaoqiao refinery to a record high in August as a new crude unit revs up, an industry source said on Friday.

The plant is expected to process about 248,200 barrels of crude oil per day in August, up 13 percent from July, according to the source.

“The new 100,000-bpd CDU will run 87,600 bpd this month, up from 51,100 bpd previously,” the source said.

The new unit has been on a trial run for months and operations are steady now, allowing the plant to dismantle a decades-old 66,000-bpd crude unit, the source added.

Gaoqiao now has crude capacity of 260,000 bpd.

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Cooling economy slows oil demand

Tuesday, August 3rd, 2010

This article comes from Bloomberg.   Reduced processing rates could put upward pressure on coke prices.

China’s crude oil demand growth may continue to slow in the third quarter as a cooling economy cuts requirements for fuel including diesel, according to data from the country’s largest oil company.

Crude consumption may average 37 million metric tons a month, or about 8.9 million barrels a day, up 9.5 percent from a year earlier, China National Petroleum Corp.’s research unit said in an e-mailed report. That compares with the 15 percent gain in the second quarter and the 22 percent increase in the first, Bloomberg calculations derived from official figures show.

The economy is cooling as the government trims credit growth, presses for energy efficiency gains and discourages multiple-home purchases. Diesel sales at China’s two biggest oil companies including China Petrochemical Corp. dropped “noticeably” last month from June, CNPC said in a statement.

CNPC and China Petrochemical, known as Sinopec Group, aren’t planning to import diesel in August, according to the statement posted on its website today.

Heavy rains, floods and an annual fishing ban from June to August for conservation reasons have also curbed diesel use, CNPC said. Privately held refineries may keep operating rates at about 33 percent in August because of weak sales, it said.

Growth in China’s diesel consumption in the third quarter may slow to 5.5 percent with monthly demand averaging 13.2 million tons, CNPC said.

Gasoline demand in the quarter will remain “relatively high” at about 6 million tons a month on average, up 7 percent from a year earlier. Kerosene use may gain 2.4 percent to 1.45 million tons a month.

China Petroleum & Chemical Corp., a unit of Sinopec Group that supplies 60 percent of the country’s fuel, fell 1.6 percent in Hong Kong trading as of 2:41 p.m. local time, lagging behind the 0.6 percent gain in the benchmark Hang Seng Index. PetroChina Co., a unit of CNPC, climbed 0.4 percent.

The country’s gasoline exports may have dropped to 300,000 tons in July from 402,000 tons in June because of domestic summer demand, CNPC said. The oil spill in Dalian last month also cut gasoline exports from PetroChina’s refineries, according to CNPC.

The country’s diesel exports may have risen to as much as 400,000 tons from 270,000 tons in June, it said.

China’s oil-product output may decline about 0.5 percent in August from last month as CNPC and Sinopec Group shut processing units at plants in Yangzi, Lanzhou, Jinxi, Daqing and Yumen for maintenance, CNPC said.

PetroChina may start operating its Qinzhou refinery in Guangxi province at the end of August or in early September, CNPC said. The plant’s operating rate won’t be high initially, according to the statement.

China’s June crude-oil processing rose at the most gradual pace in eight months as the world’s fastest-expanding economy slowed. Economic growth eased to 10.3 percent in the second quarter from 11.9 percent in the first.

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Petrochina attacking Sinopec in Shandong Province

Saturday, July 31st, 2010

Shandong’s local independent refineries have long been the poor cousin in China’s oil refining and pet coke industries.   However, this announcement is potentially good news for coke.    CNOOC has already taken a position in Shandong, so if PetroChna does the same, then more local refineries will get more and better crude oil supplies, including those with cokers.

An official with Shandong Dongming Petrochemical, an independent oil refinery in China’s northern Shandong province, said Friday that PetroChina, China’s largest oil and gas producer, has agreed to provide crude oil supply to the company.

Dow Jones Newswires quoted an unnamed company official as saying that PetroChina Fuel Oil Co, a subsidiary of PetroChina, inked an agreement with Shandong Dongming Petrochemical on July 26 over the crude oil supply issue.

The official said this is only part of the cooperation between the two companies, adding that both sides also agreed to jointly build a crude oil pipeline to connect Rizhao port and Dongming City in Shandong.

Dongming Petrochemical is the largest independent oil refinery in Shandong province. CNPC, the parent company of PetroChina, signed Thursday a cooperative framework agreement with the government of Shandong province, east China, traditionally turf of its competitor Sinopec.

Shandong province agreed to continue supporting CNPC’s business in Shandong, which has long taken petroleum and chemical sector as a pillar industry. Jiang Jiemin, boss of CNPC, said Shandong province would be CNPC’s major target market and CNPC will provide more oil products and natural gas.

China’s independent oil refineries, which have a total refining capacity of 1.9 million barrels a day, usually feel difficult to get crude oil supply due to lack of upstream oil resources and restrictions of crude oil imports.

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Sinopec crude oil processing up 16%

Thursday, July 22nd, 2010

The following article is from the China Daily a couple of days ago.    While the article doesn’t mention coking or even heavy oils, I suppose it’s a safe assumption that coke output rose as a result of the extra throughput. Those of you who know more about oil refining than I do (and I don’t know much) might have a better opinion.   Meantime, we will work on understanding the supply side of the coke business more. Sinopec is China’s largest coke producer.

China Petroleum and Chemical Corp (Sinopec), the nation’s largest oil refiner, said Tuesday that it processed 101.45 million tons of crude oil in the first half of 2010, up 16.74 percent year-on-year due to strong growth of the Chinese economy.

The company, also a leading oil producer, said in a preliminary report that its natural gas output rose strongly by 40.73 percent from the same period last year to 200.56 billion cubic meters despite crude oil output only rising 0.05 percent to 149.19 million barrels.

Sinopec saw diesel output rise by 13.33 percent to 36.72 million tons in the first half from a year earlier, while kerosene was up 29.96 percent, the company said.

Strong domestic economic growth in the first half had contributed to the increases in its rising output.

China’s gross domestic product (GDP) grew 11.1 percent year-on-year in the first half, according to the National Bureau of Statistics.

Gasoline output rose by 4.59 percent year-on-year in the first half,said the company.

Ethylene went up by 41.34 percent, synthetic resins by 28.51 percent, synthetic fibers by 7.47 percent and synthetic rubbers by 18.58 percent.

Domestic sales of refined oil products rose sharply by 18.09 percent year-on-year to 68.15 million tons in the first half.

Sinopec reported its net profit in the first quarter rose 39.93 percent year-on-year to 15.785 billion yuan ($2.3 billion).

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China passes USA in Saudi oil imports

Tuesday, February 23rd, 2010

The following article comes from London’s Financial times.

Saudi Arabia’s oil exports to the US last year sank below 1m barrels a day for the first time in two decades just as China’s purchases climbed above that level, highlighting a shift in the geopolitics of oil from west to east.

The drop in US demand for oil from the kingdom, traditionally one of its primary sources, is the result of overall lower energy consumption but also greater reliance on imports from Canada and Africa.

China’s economic growth, meanwhile, is prompting Beijing to buy more Saudi oil, a trend Riyadh has encouraged through refinery joint ventures.

“China offers demand security, something that for a long time the oil-producing countries including Saudi Arabia have called for,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh. “As global demand has been picking up in the east . . . Saudi Arabia has been looking east.”

Barack Obama, US president, wants to reduce US dependence on foreign oil and encourage renewable fuels. Meanwhile, Saudi Arabia wants stable markets for its oil reserves.

The divergence will provide the backdrop as Steven Chu, US energy secretary, visits Riyadh on Monday. His agenda reflects Washington’s focus, with an emphasis on technology research rather than oil politics.

The drop in Washington’s reliance on Riyadh’s oil is unlikely to alter dramatically their relationship, at least in the short-term. Analysts say oil is a fungible commodity and any supply shock in the Middle East will still affect the US economy in spite of lower imports from Saudi Arabia. On the other hand, China’s rising demand for Saudi oil, on top of already large purchases of Iranian crude, could boost Beijing’s interest in the region.

The US imported 998,000 b/d of Saudi crude in the first 11 months of 2009, the lowest since 1988, according to official data. Analysts expect that December figures will confirm the drop. The fall came as Saudi oil exports to China hit a record in December above the psychologically significant 1m b/d level. Beijing has doubled the amount of oil it buys from the kingdom over the past three years.

For years, state oil company Saudi Aramco “was under strict orders to be first in sales” to the US, a strategy that was “political and not commercial”, according to Amy Myers Jaffe and Jareer Elass at Rice University in Houston. That changed in 2003 after the Saudi ruling elite relaxed the strategy.

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China depending more on imported oil

Sunday, January 24th, 2010

This article appeared in last week’s China Daily.   Economists looking for reasons why China’s bubble might eventually burst may need to look at the future of global crude oil pricing.   A rise to pre-GFC levels could have disastrous consequences for inflation in China, which in turn is probably the chief threat to the general health of the economy today. Here is the article.

China’s oil imports will continue to see solid growth this year, with more than half of the country’s total oil consumption coming from abroad, industry insiders said.

It is inevitable for the country – the world’s second largest oil consumer – to see a robust increase of imports, as domestic production cannot keep up with rising demand, they said. China’s oil dependency reached alarming levels last year with imports accounting for 52 percent of total consumption, China Business News reported yesterday, citing Zhang Xiaoqiang, vice-minister of the National Development and Reform Commission.Importing more than 50 percent is a globally recognized level for an energy security alert.

The country’s oil imports in 2010 are expected to grow five percent from a year earlier, and the proportion of imported oil consumed may further rise to 54 percent this year, said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University. “Domestic production is already at its peak,” he said. “Although domestic companies have accelerated their overseas expansion, the resources they already gain are still limited.”

Customs figures showed that China imported 204 million tons of oil last year, while the country’s total production was 190 million tons.

Lin’s views are echoed by Han Xiaoping, chief information officer of china5e.com, a leading energy website in the country, saying oil imports would maintain a brisk growth in the future. However, importing too much would hurt energy security, he added.

According to a report by the Chinese Academy of Social Sciences (CASS), 64.5 percent of China’s oil consumption is likely to be met by imports in 2020, with the gap between domestic consumption and production as the main reason. Statistics from CASS showed that China’s oil production is expected to stand at 177 to 198 million tons in 2010, and the figure would reach 182 to 200 million tons in 2015. China’s oil production will see a gradual decline after 2020, according to CASS.

China National Petroleum Corp, the country’s largest oil and gas producer, said in a commentary in its online newsletter yesterday that the country’s oil imports would be affected by many factors, such as rising global competition and volatile energy prices.

Chinese companies should avoid competing with their domestic peers in the international market, said the report. Analysts said that China should further diversify its sources for importing oil to find a more sustainable supply. At present the Middle East, Africa and the Asia-Pacific are the three main regions that supply oil for China.

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Global oil supply ‘far worse than admitted’

Tuesday, November 10th, 2009

The following article comes from the Guardian in the UK.   It is a respected journal, so the story has surely been carefully examined by its editors.   However, this is probably not the last of it.

THE world is much closer to running out of oil than official estimates admit, says a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.

The senior official claims the United States has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oilfields while overplaying the chances of finding new reserves.

The allegations raise serious questions about the accuracy of the organisation’s latest World Energy Outlook on oil demand and supply, to be published overnight.

The outlook is used by many governments to help guide their energy and climate change policies.

In particular, the allegations cast a shadow on the prediction in the last World Economic Outlook, believed to be repeated again this year, that oil production can be raised from its present level of 83 million barrels a day to 105 million.

External critics have frequently said this cannot be substantiated by firm evidence and that the world has already passed its peak in oil production. Now the ”peak oil” theory is gaining support at the heart of the global energy establishment.

”The IEA in 2005 was predicting oil supplies could rise as high as 120 million barrels a day by 2030, although it was forced to reduce this gradually to 116 million and then 105 million last year,” said the IEA source, who asked not to be identified for fear of reprisals inside the industry.

”The 120 million figure always was nonsense but even today’s number is much higher than can be justified and the IEA knows this.

”Many inside the organisation believe that maintaining oil supplies at even 90 million to 95 million barrels a day would be impossible, but there are fears that panic could spread on the financial markets if the figures were brought down further.”

A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was ”imperative not to anger the Americans” – but the fact was that there was not as much oil in the world as had been admitted.

”We have [already] entered the ‘peak oil’ zone,” he said. ”I think that the situation is really bad.”

The IEA said last night that peak oil critics had often wrongly questioned the accuracy of its figures. A spokesman said it was unable to comment before the release of the 2009 report.

The IEA was established in 1974 after the oil crisis, in an attempt to try to safeguard energy supplies to the West.

Matt Simmons, a respected oil industry expert, has long questioned the decline rates and oil statistics provided by Saudi Arabia on its own fields. He has raised questions about whether peak oil is much closer than many have accepted.

Steve Sorrell, chief author of a report by the UK Energy Research Council, said forecasts suggesting oil production would not peak before 2030 were ”at best optimistic and at worst implausible”.

But as far back as 2004 there have been people making similar warnings. Colin Campbell, a former executive with French company Total, told a conference: ”If the real [oil reserve] figures were to come out, there would be panic on the stockmarkets … in the end, that would suit no one.”

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China’s top refiners to run at record in November

Monday, November 9th, 2009

The following story appeared in today’s China Daily.

 

China’s leading refineries will raise their crude processing mildly in November to a record high as signs of recovering demand are piling up while a widely-expected fuel price hike nears.

Twelve major plants accounting for more than a third of China’s capacity, most of them on the country’s eastern and southern seaboards, plans to process 2.70 million barrels per day of crude oil in November, 1.1 percent higher than October, a Reuters poll showed.

The volume would represent around 90 percent of their total refining capacity.

Fujian Refining & Petrochemical Co Ltd, a joint venture between Sinopec Corp, Exxon Mobil and Saudi Aramco, is expected to continue to rev up operations this month. It will hold a formal launching ceremony next week.

Crude throughput at PetroChina’s Jinxi will tilt up after a sharp increase of more than 60 percent in October, but the level would still be far below its capacity due to insufficient complementary downstream facilities.

Senior Sinopec officials have said the top refiner in Asia suffered a refining loss in October but sales were expected to improve continuously. One of the officials forecast a profitable fourth quarter because of confidence in China’s fuel pricing scheme that guarantees a profit margin if oil prices are below $80 a barrel.

Analysts said last week that China may raise retail fuel prices by 5-6 percent after benchmark crude prices rose more than 6 percent since Beijing’s last price move in September.

The moving average of international crude oil prices, on which China’s fuel prices are based, climbed further this week.

“An increase was certain, but the timing was uncertain and the government would not explain,” one Shanghai-based oil analyst said.

China’s apparent oil demand rose 12.5 percent in September from a year earlier, the sixth rise in a row and the fastest rate since June 2006, Reuters calculation showed.

China’s energy authorities also forecast a double-digit growth rate of apparent demand for refined oil products, mainly gasoline, diesel and kerosene, in the fourth quarter on the back of an improving economy.

Fuel stocks held by Sinopec Group and CNPC, which operate a majority of their businesses via listed Sinopec Corp and PetroChina respectively, fell for the second month in a row in September, despite record crude throughput, partly indicating healthier fuel demand.

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Crude oil in the picture

Monday, September 28th, 2009

Commencing this week, we have added crude oil to our industry analysis.

Every industry that we watch has some direct or indirect connection to crude oil.   Clearly petroleum coke is a downstream by-product of crude oil refining.   But the entire Chinese economy can in part be monitored by what happens in the crude oil market.   The aluminium sector also has a correlation with crude, not only via the input cost of the anodes and the cost of shipping and transport.   With GDP, so goes aluminium consumption, and the same is also true for crude oil.

Subscribers to AZ China’s Black China Report have access to the weekly industry update (see next post).    If you aren’t a subscriber, please contact us at blackchina@az-china.com for more information about a subscription.

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