China is investing tens of billions of dollars to build new mega refineries even as fuel demand stalls due to the coronavirus pandemic. At least four projects comprising about 1.4 million bpd of crude processing capacity are being developed in places such as Zhejiang, Jiangsu, and Yantai. These new facilities are geared to focus on more petrochemical production rather than transportation fuels. This will likely be a concern for petrochemical and plastic plants in Taiwan and other East Asian countries that were built to meet Chinese demand.
Despite the focus on petrochemical output, declining domestic demand raises the risk these refineries will flood the region with cheap exports. State-owned China National Petroleum Corp (CNPC) sees domestic fuel demand to grow more slowly in the future as the country initiates a long transition toward carbon neutrality. CNPC said refined products demand would edge up by just 0.9% annually through 2025 and peak around then, sharply decelerating from average annual growth of 5.6% in 2000 to 2019.
China’s crude processing capacity has tripled since the 2000s. Last year alone, the country added about 1 million bpd capacity. Analysts said that China’s fuel production had exceeded domestic requirements, leading to exports of about 1 million bpd. Additional supplies from the new mega refineries are posing existential threats to smaller Chinese refineries, as well as refineries in Japan and even Australia.
