China is increasing its oil refining capacity and may replace the United States as the leader in this market next year. Bloomberg writes about this with reference to the International Energy Agency (IEA), reports RBC .
“America has been the leader in oil refining since the beginning of the oil era in the middle of the 19th century, but <…> China will overthrow the United States next year,” the publication states.
A change in the leader in the oil refinery market may occur, among other things, due to the fact that at least four new refineries are currently being built in China, while such enterprises are being closed in the USA (for example, the Convent plant in Louisiana, owned by Shell, the third largest oil company in the world). When Convent opened in 1967, the U.S. refining capacity was 35 times that of China, Bloomberg notes.
According to the agency, the total capacity of new Chinese enterprises will be 1.2 million barrels. per day, which is equivalent to oil refining throughout the UK. At the same time, due to the crisis caused by the COVID-19 coronavirus pandemic, the global demand for fuel has decreased, which is why oil production and refining also had to be reduced. Oil refining fell by a record 1.7 million barrels. per day, and more than half fell on enterprises in the United States.
In addition, as the agency notes, the crisis has accelerated and changes in oil consumption. In China and other parts of Asia, the demand for plastic and oil is growing. There, the economy is quickly recovering from the coronavirus pandemic, unlike Europe and the United States, where the pandemic is not abating and the crisis is much deeper.
The rise of China’s refining industry, coupled with the emergence of several large new plants in India and the Middle East, is reflected in the global energy system, Bloomberg writes. Oil exporters sell more oil to Asia and less to longtime buyers in North America and Europe.
As production capacity increases, Chinese refineries are becoming more active participants in the international markets for gasoline, diesel and other fuels. It even puts pressure on older refineries in other parts of Asia (for example, Shell previously announced that it would cut the capacity of its Singapore refinery in half).
While capacity will grow in China, India and the Middle East, oil demand could take years to fully recover from the damage caused by the coronavirus, the agency said.
China’s refining capacity has nearly tripled since the turn of the millennium as it struggled to keep up with the rapid rise in diesel and gasoline consumption. According to the Research Institute of Economics and Technology of the China National Petroleum Corporation (CNPC), oil refining in China is expected to increase by 1 billion tons per year, or 20 million barrels. per day, by 2025 from 17.5 million barrels. per day at the end of this year.