A Shifting Refinery Landscape Could Lead to New Tanker Routes
According to Gibson, “according to the IEA, US refining capacity is currently 18.4 million b/d. However, recent news that Shell was closing its Convent refinery in Louisiana and that various other refineries are or will be mothballed will mean that long-term refining capacity in the US will contract. This is in contrast to the refinery expansion currently being undertaken in China. Rongsheng Petrochemical’s giant 400 k b/d Zhejiang complex in northern China is currently being commissioned. In addition, work has begun on the Yulong refinery and petrochemical complex in Shandong, which once complete in 2024 will be able to process 400 k b/d. Also, there are plans for additional plants that will add a further 400 k b/d. However, this new refining capacity will see some of the older, smaller and less economic teapot refineries close, meaning overall refinery throughput will remain below average US levels for a little while longer”.
The shipbroker added that “despite Asia leading the demand recovery, it is not just the Western nations where refining capacity continues to contract. Australia is a case in point where 473 k b/d of capacity has confirmed its closure, most recently with ExxonMobil converting the Altona refinery in Australia to an import terminal. Elsewhere in Asia, Shell has already shuttered its Tabangao refinery in the Philippines and is set to reduce capacity at its Pulau Bukom refinery in Singapore by 2022, meaning the region will lose at least 700 k b/d of refining capacity. China’s geographic location and advanced new refinery capacity will place the country in pole position to fill the supply shortfalls left by shuttered refining capacity, which will become particularly prominent once demand fully recovers from the pandemic. This will provide a refocus of trading lanes for the product tankers, not just within Asia, but possibly further afield”.
Gibson concluded that “so, with increasing capacity in China, and the closure of refineries and declining utilisationrates in the US, China is expected to surpass the US as the world largest oil refiner. Its refining capacity has nearly tripled since the turn of the millennium as it tries to keep pace with rapid demand growth both within the country and export demands. The country’s crude processing capacity is forecast to reach 20 million b/d by 2025, up from the current 17.5 million b/d according the China National Petroleum Corp.’s Economic & Technology Research Institute. The rise of Chinese refinery capacity will have a knock on effect on the global refining capacity. The IEA have already highlighted that they expect more refineries to be mothballed or permanently closed in the near future, on top of the 1.7 million b/d that closed during 2020. New Chinese capacity could be the cause of further refinery closures. Will the market be able to adjust to the new dominance of the Chinese refining complexes? Only time will tell”, the shipbroker said.
Nikos Roussanoglou, Hellenic Shipping News Worldwide