Middle Eastern crudes gain bigger share of independent refineries in 2021
Middle Eastern crude suppliers have gained a bigger market share of China’s independent refiners’ crude feedstock portfolio, accounting for nearly a third of the total in 2021, latest data by S&P Global Platts showed Jan. 7.
Crudes from the Middle East — Saudi Arabia, UAE, Oman and Kuwait — emerged as the biggest winner in 2021, with their combined share of crude shipments to China’s independent refiners accounting for 32.5% of the total, compared with 24.3% in 2020.
These countries also supplied a bulk of the medium-sour crudes to the new refining complex of Hengli Petrochemical (Dalian) Refinery and Zhejiang Petroleum & Chemical.
The combined crude outflows from those four countries to China rose 25.9% year on year to 57.5 million mt in 2021.
Inflows into China’s independent refineries from the Middle East will likely rise further in 2022 as the new 16 million mt/year Shenghong Petrochemical is scheduled to come onstream in the first half. Shenghong is designed to process crudes from Saudi Arabia with a ratio of 50:50 for Arab Light and Arab Heavy.
Increasing barrels from Iran, masked as crudes from Oman or UAE, also contributed drastically to the rising share of imports from the Middle East.
In 2021, around 22.8 million mt of Iranian crudes were imported under various covers into China’s Shandong province, where most independent refineries are located. Last year, at least 10.6 million mt of the total supplies from Iran were reported as cargoes originated from Oman or UAE, in addition to other Malaysian blended grades. This compares to a miniscule figure in 2020, when refiners imported bitumen blend occasionally and on an ad-hoc basis from Iran as a feedstock supplement.
Iranian crudes are competitively priced, usually about Yuan 300-400 ($46.9-62.5)/mt lower than those normal grades, making them attractive for independent refineries. However, imports from Iran might likely shrink due to decreasing crude quotas, as fewer quotas will be available to bring those cargoes in.
On Dec. 30, China’s Ministry of Commerce allocated a total of 107.4 million mt crude import quotas to 36 qualified independent refineries in the first batch of 2022, a drop of 9.4% from 2021’s first batch.
Malaysia becomes top supplier
Malaysia gained the biggest share among the top 10 crude suppliers in 2021, with a year-on-year increase of 84.9% from 2020.
Imports of 28.5 million mt from Malaysia accounted for 16.1% of independent refineries’ crude imports in 2021. This was almost double the growth of 8.2% seen a year earlier.
Bitumen blend ranked as the top feedstock from Malaysia, with its imports for China’s independent refiners standing at 14.67 million mt in 2021, up 105.5% on the year, making it the second most favored feedstock after ESPO from Russia.
Bitumen blend, which doesn’t require a crude import quota, became a supplement feedstock for plants short of quotas in the second half of 2021. This comes despite the grade being subject to an additional Yuan 1,218/mt ($190.3/mt) in consumption tax, on top of the existing 8% import tax and 13% value added tax after June 12, 2021.
Imports of Nemina more than doubled to 7.44 million mt in 2021, rising 132.4% on the year.
Nemina used to be a regular blended crude from Malaysia, which was mainly imported by ChemChina. However, the company has not received any volumes of the grade since August 2021.
In addition to those two grades, Mal Blend, Malaysian blend, as well as Singma, which are mainly related to the heavy inflows of Iranian crudes, also propelled strong imports from Malaysia.
Russia, Brazil, Angola supplies wane
In contrast, imports from traditional suppliers Russia, Brazil and Angola fell significantly in 2021.
Imports from Brazil fell 49.3% on the year to 12.4 million mt in 2021. Supply from Angola fell 18.6% on the year to 13.2 million mt.
Imports from Russia, which was overtaken by Malaysia, fell by 11.6% on the year to 26.9 million mt in 2021.
This came despite a marginal increase of 0.9% year on year to 23.5 million mt last year in the total imports of ESPO — considered among the most favored crudes by Shandong’s independent refineries.
Russia, Brazil and Angola used to be the top three suppliers for China’s independent refineries. But with blended crudes from Malaysia having increased, and new refining complexes favoring grades from the Middle East including Saudi Arabia, the three prominent suppliers in the past took a back seat.
Platts collects information covering feedstocks imported by independent refineries in Shandong province, Tianjin, Zhoushan and Dalian, Lianyungang, including 37 crude import quota holders, and other non-quota holders.
These 37 refiners have been a combined 158.38 million mt of crude quotas in 2021, accounting for 86% of the total allocations to the independent refining sector in the year.