Evolution of Chinese Independent Refineries
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EVOLUTION OF CHINESE INDEPENDENT REFINERIES
James GaoIndustry AnalystSCI International Business Unit
Evolution of Chinese Independent Refineries
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Evolution of Chinese Independent Refineries
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Excellence Creates Miracle
SERVICE SYSTEM
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Evolution of Chinese Independent Refineries
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Evolution of Chinese Independent Refineries
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Evolution of Chinese Independent Refineries
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History and Current Situation of Shandong Independent Refineries
1960–1999Birth & Breaking Through
2015–PresentImport & Export Policies
2000–2010Tough Reform & Rise
2011–2014From Disordered to Well-Organized
13,124,760 bbl/a
212,265,189
2,736,477
40,000
540,000
1,040,000
1,540,000
2,040,000
2,540,000
3,040,000
2012 2013 2014 2015 2016
bbl/day 2012–2016 Shandong Independent Refineries’ Capacity
5
Sinopec, 37%
PetroChina, 27%
CNOOC, 5%ChemChina
, 3%
Sinochem Quanzhou
Petrochemical , 2%
China North
Industries Group, 1%
Shandong Independent
Refineries, 17%
Other Independent Refineries, 8%
Others, 25%
2016 Chinese Oil Refining Capacity Structure
Evolution of Chinese Independent Refineries
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Independent Refineries’ Refined Oil Products Output
2012–2016 Gasoline and Diesel Output Comparison between Shandong Independent Refineries and Chinese Refineries
Shandong independent refineries’ gasoline and diesel output is increasing. The output reached 473.44 million barrels in 2016, covering 19.38% of China’s gasoline and diesel output.
History and Current Situation of Shandong Independent Refineries
6
2012–2016 Shandong Independent Refineries’ Gasoline and Diesel Output
19.38%
10%
12%
14%
16%
18%
20%
0
500
1,000
1,500
2,000
2,500
3,000
2012 2013 2014 2015 2016
million bbl
Shandong independent refineries' output
Chinese output
Shandong independent refineries' proportion
197
302
0
50
100
150
200
250
300
350
2012 2013 2014 2015 2016
million bbl
Gasoline Diesel
Evolution of Chinese Independent Refineries
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Content
Content
Previous Issues
— Insufficient Crude Oil & Product Quality Upgrade
1
Current Situation
— Three Rights Obtainment & Status Promotion
2
Current Issues
— Challenges & Opportunities3
Chinese Independent Refineries’ Future
— New Start of Independent Refineries
4
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Evolution of Chinese Independent Refineries
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1PART ONE
Chinese Independent Refineries’ Previous Issues
— Insufficient Crude Oil & Product Quality Upgrade
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Evolution of Chinese Independent Refineries
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Chinese Independent Refineries’ Previous Issues
$35/bbl
2015/11994 2005/9 2006/4 2008/1 2009/1 2014/11 2014/12
0.03
0.10.2
0.8
0.94
11.1
1.121.2
1.4
1.52
RMB/L Gasoline Diesel Fuel oil
Insufficient crude could be refined was the biggest bottleneck, and the consumption taxworsened the fuel oil refining .
2009 Shandong Independent Refineries’ Feedstock Structure
Fuel oil
57%
Crude oil
43%
2009
9
Chinese Consumption Tax of Oil Products
Evolution of Chinese Independent Refineries
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The upgrade of Chinese gasoline and diesel national standards made the refining difficulty double for inferior feedstock.
ESPOM100
1.54% 1.52% 1.5%
0.6%
Merey crude oil
Shenglioil
S content comparison
GB III
GB IV
GB V
Sulphur content limit
Chinese Independent Refineries’ Previous Issues
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Evolution of Chinese Independent Refineries
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1 3 52 4
EnvironmentalProtection Pressure
Loan Difficulty
Low Brand Recognition
Tax Pressure
ProductHomogeneity
Chinese Independent Refineries’ Previous Issues
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Suppressed by feedstock and policies, independent refineries were sold and eliminated.
Crude oil
&Policy
oppressionAcquisition Exchange
Chinese Independent Refineries’ Previous Issues
Elimination
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Content
Content
13
Previous Issues
— Insufficient Crude Oil & Product Quality Upgrade
1
Current Situation
— Three Rights Obtainment & Status Promotion
2
Current Issues
— Challenges & Opportunities3
Chinese Independent Refineries’ Future
— New Start of Independent Refineries
4
Evolution of Chinese Independent Refineries
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2PART TWO
Chinese Independent Refineries’ Current Situation
— Three Rights Obtainment & Status Promotion
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Chinese Independent Refineries’ Current Situation
Crude oil policy loosening is in favor with the general public and also a transformation of state attitude.
Crude oil
77.18%
Others
22.82%
Fuel OilBitumen mixture
2015 Raw Material Structure of Shandong Independent Refineries
53%
58%
62%
70%
77%
20
11
-2
01
5
15
2011–2015 Crude Oil Proportion in Shandong Independent Refineries’ Raw Materials
Evolution of Chinese Independent Refineries
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Chinese Independent Refineries’ Current Situation
Independent refineries’ operating rate increased greatly, backed by the sufficient supply ofcrude oil.
16
26.04%
64.40%
20%
30%
40%
50%
60%
70%
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16
2012-2016 Shandong Independent Refineries' Operating Rate
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Independent refineries are becoming more and more competitive, through capacity expansion.
Chinese Independent Refineries’ Current Situation
Top 10 Shandong Independent RefineriesUnit: bbl/day
Ranking Region Refinery Capacity1 Weifang Changyi Petrochemical 160,438.362 Heze Dongming Petrochemical 150,410.963 Dongying Huaxing Petrochemical 140,383.564 Dongying Hualian Petrochemical 124,339.735 Zibo Huifeng Petrochemical 116,317.816 Dongying Wantong Petrochemical 116,317.817 Weifang Hongrun Petrochemical 114,312.338 Dezhou Hengyuan Petrochemical 110,301.379 Dongying Tianhong Chemical 100,273.97
10 BinzhouChina Offshore Bitumen (Binzhou)
100,273.97
17
445,417
1,455,015
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
2012 2013 2014 2015 2016
bbl/day
2012–2016 Shandong Independent Refineries’ Crude Oil Processing Volume
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Main types of imported crude oil that independent refineries are processing
Chinese Independent Refineries’ Current Situation
Refinery Crude TypeDongming Petrochemical Oman, Mandji, MereyLijin Petrochemical Oman, Cinta, offshore oil, Shengli oilKenli Petrochemical ESPO, Cinta, offshore oil, Shengli oilYatong Petrochemical Oman, Duri, Urals, offshore oil, Shengli oilHongrun Petrochemical ESPO, KuwaitHuifeng Petrochemical Oman, Escolante, VasconiaTianhong Chemical Oman, Cinta, Songkhla, offshore oil, Shengli oilChambroad Petrochemicals Arabian HeavyLuqing Petrochemical ESPO, OmanQirun Chemical Oman, Escolante, Mezcla,Haiyou Petrochemical Sadun, EscolanteHengyuan Petrochemical West African oil, offshore oilQingyuan Petrochemical offshore oil, DjenoShenchi Chemical offshore oil, Shengli oil
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Oman, 32%
ESPO, 20%
Duri,12%
Others, 36%
Imported Crude Oil Types
Evolution of Chinese Independent Refineries
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Crude oil demand is increasing, and more independent refineries are applying for quotas.
1 2 3
Chinese Independent Refineries’ Current Situation
Refinery 2017 1st Batch 2016Dongming Petrochemical 48,092,400 54,900,000 Panjin North Asphalt 41,504,400 51,240,000 Hongrun Petrochemical 37,258,800 38,796,000 Lijin Petrochemical 22,838,400 25,620,000 Kenli Petrochemical 16,396,800 18,446,400 Baota Petrochemical 3,367,200 45,091,200 Yatong Petrochemical 14,713,200 20,203,200 Huifeng Petrochemical 12,224,400 30,451,200 Luqing Petrochemical 15,957,600 18,885,600 Tianhong Chemical 27,450,000 32,208,000 Chambroad Petrochemicals 5,709,600 24,229,200 Qirun Chemical 15,225,600 16,104,000 Haiyou Petrochemical 3,147,600 23,424,000 Hengyuan Petrochemical 12,810,000 25,620,000 Wudi Xinyue Chemical 8,784,000 17,568,000 Qingyuan Petrochemical 14,786,400 29,572,800 Shenchi Chemical 9,223,200 18,446,400 Jincheng Petrochemical 10,980,000 21,960,000 Xinhai Chemical 13,615,200 27,230,400 Total 334,084,800 539,996,400
Unit: bbl
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Evolution of Chinese Independent Refineries
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Refined oil products export is a new beginning.The export volume will increase, but the increase will be limited.
Chinese Independent Refineries’ Current Situation
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1,019
1,255
0
200
400
600
800
1,000
1,200
1,400
2012 2013 2014 2015 2016
million bbl
2012–2016 Chinese Gasoline and Diesel Apparent Consumption Volume
Gasoline Diesel
50
82
55
117
0
20
40
60
80
100
120
140
2012 2013 2014 2015 2016
million bbl2012–2016 Chinese Gasoline and Diesel Export Volume
Gasoline Diesel
Evolution of Chinese Independent Refineries
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Sufficient Crude Oil
Chinese Independent Refineries’ Current Situation
Operating Rates Increasing
Capacity Expanding
Industrial Position Improving
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Evolution of Chinese Independent Refineries
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Content
Content
22
Previous Issues
— Insufficient Crude Oil & Product Quality Upgrade
1
Current Situation
— Three Rights Obtainment & Status Promotion
2
Current Issues
— Challenges & Opportunities3
Chinese Independent Refineries’ Future
— New Start of Independent Refineries
4
Evolution of Chinese Independent Refineries
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3PART THREE
Chinese Independent Refineries’ Current Issues
— Challenges & Opportunities
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Evolution of Chinese Independent Refineries
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Chinese Independent Refineries’ Current Issues
Despite the benefit of crude oil policy, independent refineries still face problems.
Will new crude oil be suitable for independent refineries’ units?
Production
How can the crude oil be imported, curbed by low transportation capability?
Infrastructure
How will independent refineries reduce risks, with no crude oil import experience?
Procurement
How will independent refineries sell their products, considering severe oversupply?
Marketing
24
Evolution of Chinese Independent Refineries
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Simplify the crude oil purchasing process, and try to raise their international position.
How to purchase the crude oil
7 applying refineries
7refineries with imported crude oil use right
5refineries with imported crude oil use right and imported crude oil qualification
Lack of bargain power
Disordered bidding procurement
Loan difficulty
High transportationcost
S!
S
China Petroleum Procurement Federation of Independent Refineries
Chinese Independent Refineries’ Current Issues
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Evolution of Chinese Independent Refineries
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Build more pipelines to reduce transportation costs.
Chinese Independent Refineries’ Current Issues
Laizhou Port莱州港
Yanzi Line (453km)
Laichang Line (110km)
Huangwei Line (190km)
Ridong Line (446km)
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Evolution of Chinese Independent Refineries
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The raw material change leads to a rising tax expense, so the fuel oil will still exist in the short term.
1,218 RMB/mt
26.70 USD/bbl
Fuel oil
purchase
Crude oil
0purchase
sale
Gasoline and diesel consumption tax
2,110 / 1,411 RMB/mt
36.03/26.88 USD/bbl
Chinese Independent Refineries’ Current Issues
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Evolution of Chinese Independent Refineries
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Raise sales volumes of gasoline and diesel.
Cooperate with state-owned enterprises
2015 Shandong Gas Stations Layout
Build more gas stations
Cooperative marketingCompete with state-owned enterprises
Appropriate export
Sinopec22.93%
PetroChina8.71%
CNOOC0.47%
SHELL0.78%
Shandong Independent
Refineries 3.73%
Private63.39%
Others67.12%
Chinese Independent Refineries’ Current Issues
Increase purchase volumes
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Evolution of Chinese Independent Refineries
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Increase the plant competitiveness.
Enhance units’ competitiveness
Hydrogenation technology
Follow-up unit update
Units’ energy consumption reduction
Units need to adapt to the feedstock structure change
Hydrogenation47%
Atmospheric and vacuum
28%
Reformer12%
RFCC 8%
Delayed coking5%
Newly-added refining units of Shandong independent refineries
Chinese Independent Refineries’ Current Issues
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Evolution of Chinese Independent Refineries
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The “floor price” protects refineries’ profit.
0
100
200
300
400
500
600
700
800
Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16
RMB/mt
Shandong Independent Refineries’ Oil Refining Profit
Chinese Independent Refineries’ Current Issues
30
40/bbl
Evolution of Chinese Independent Refineries
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Strengthen international cooperation, and lengthen industrial chains.
2015Russia's Rosneft provided 10,000ktof light crude oil for ChemChina.The crude oil import quota of
ChemChina is 10,000 kt/a .
November 2015Dongming petrochemical signed along-term crude oil supply agreementwith BP ;The imported crude oil usage volume
for Dongming Petrochemical is 7,500kt/a.
January 2016Hengyuan Petrochemical acquiredthe Malaysian-Based Shell RefiningCompany.
The application of 3,720 kt/aimported crude oil use right fromHengyuan Petrochemical is waitingfor approval
Lihuayi Group signed agreements oncrude oil import with BP, Dutch Shell ,Switzerland Vitol ,etc.The imported crude oil usage volume
for Lijin Petrochemical is 3,500 kt/a.
Tianhong Chemical signeda strategic agreement withBP on crude oil import;The imported crude oilusage volume for Tianhong
chemical is 4,400 kt/a.
Chambroad established a trading company inoverseas with a main business of importingcrude oil .The imported crude oil usage volume for
Chambroad is 3,310 kt/a.
The independent refinerieswithout crude oil non-stateimport trade qualification arealso active to explore theoverseas market
运输
采购
国际合作加强
Chinese Independent Refineries’ Current Issues
Challenges Opportunities&
Marketing
Production
Procurement
Infrastructure
International cooperation is strengthening.
The floor price makes the crude oil refining come into practice.
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Evolution of Chinese Independent Refineries
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Content
Content
32
Previous Issues
— Insufficient Crude Oil & Product Quality Upgrade
1
Current Situation
— Three Rights Obtainment & Status Promotion
2
Current Issues
— Challenges & Opportunities3
Chinese Independent Refineries’ Future
— New Start of Independent Refineries4
Evolution of Chinese Independent Refineries
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4PART FOUR
Chinese Independent Refineries’ Future
— New Start of Independent Refineries
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Evolution of Chinese Independent Refineries
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Chinese Independent Refineries’ Future
The industrial position of Shandong independent refineries is promoted. The demand for crude oil will be rising in the short term.
Break state-owned refineries’ monopoly
National policy support
Transformation & upgrading
Activate the refining industry
①
④
②
③
150,000
2,150,000
4,150,000
6,150,000
8,150,000
10,150,000
12,150,000
14,150,000
2012 2013 2014 2015 2016
bbl/day2012–2016 Chinese Crude Oil Apparent Consumption
Volume
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Evolution of Chinese Independent Refineries
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Chinese Independent Refineries’ Future
Crude oil will be the only raw material, and Shandong independent refineries will start a new round of reshuffle.
山东地炼发展成熟之时,必能与中字头企业分庭抗礼
Mature stage of Shandong independent refineries
Crude oil
>99%
Raw material
Profit = Survival
Capital cost
Unit cost
Operating cost
Labor cost
Serious homogenization &intense internal competition
Future position = Survival
Brand
Integration
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Evolution of Chinese Independent Refineries
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National policy orientation
Independent refineries are a major force to promote thedevelopment of China's oil refining industry, and three rightsdelegation is only a new start for independent refineries.
The Chinese government hopes to build a large-scale anddiversified development pattern in Chinese oil refiningindustry.
The marketization of China's oil refining industry has neverstopped, which is the foundation for the healthy developmentof China’s refining industry. Shandong independent refineriesare of great significance for China’s refining industry.
Due to the tough energy security situation, the futureChinese policies will proceed from this aspect .
Chinese Independent Refineries’ Future
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Analyst TeamExcellence Creates Miracle
DATA COLLECTION
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Data Report Value Added Service
Excellence Creates Miracle
SERVICE SYSTEM
Supply – Capacity, Output, Import, Stock, Operating rate, Storage capacity, Refinery data, etc.
Demand – Export, Apparent consumption volume, etc.
Regular Report Weekly/Monthly/Annual report, Data analysis report
Multi-client Report 2017–2020 China’s Independent Refineries Business Report
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CONTENTS
2017–2020 China’s Independent Refineries Operation ReportContents
Part 1 1960–2017 China’s Independent Refineries Development History
Part 2 China’s Independent Refineries’ Refining Process Analysis
Part 3 China’s Independent Refineries Product Circulation Analysis
Part 4 China’s State-Owned Integrated Refineries & Independent Refineries Oil Processing Section Key
Part 5 China’s Independent Refineries Development Outlook
1
2
3
4
5
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Evolution of Chinese Independent Refineries
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