Surplus oil refining capacity to rise, says CNPC unit

China's surplus oil refining capacity will increase by 120 million metric tons this year as more private refinery projects commence operations, a leading industry body said.

Total oil refining capacity for this year is expected to be around 863 million tons, with the primary processing capacity of crude rising by 32 million tons, said a report released on Wednesday by China National Petroleum Corp's Economics and Technology Research Institute.

According to the institute, momentum remained strong in China for further expansion of refining capacity, though the efforts to eliminate overcapacity have been lagging. The country also achieved net gains of 22.25 million tons from the primary processing of crude oil, more than half of the global net growth.

Industry sources expect China's oil product exports to grow this year, thanks to an increase in domestic product supplies which will surpass demand growth.

Wang Lu, an Asia-Pacific oil and gas analyst at Bloomberg Intelligence, said refined oil product exports from China will see an upswing in the next three years. "China will see rapid refinery expansion from 2019 to 2021, during which it will add additional capacity of 3.1 million barrels per day," she said.

"Private enterprises such as Zhejiang Petrochemical, Hengli Petrochemical and Shenghong Group have been constructing sizable oil refineries. These are expected to increase capacity by 1.52 million barrels a day from 2019 to 2021."

The Sinopec Economics and Development Research Institute estimated earlier this year that China's oil product exports will rise 9 percent year-on-year to 51 million tons in 2019.

Oil product surplus will surge and competition will be more intense, as two greenfield firms - Hengli Petrochemical and Zhejiang Petrochemical, each with a capacity of 20 million tons per year - will add about 10 million tons of new oil products to the domestic market, much higher than the domestic demand growth of 6 million tons, the report said.

The EDRI expects China's refining capacity to reach 880 million tons this year, up 45 million tons from 2018.

According to the CNPC Economics and Technology Research Institute, China's reliance on imported oil and gas has been climbing in recent years. The country, the biggest crude and gas importer in the world, imported 440 million tons of crude oil in 2018, a year-on-year increase of 11 percent, and 125.4 billion cubic meters of gas, a year-on-year increase of 31.7 percent. Foreign dependence ratio of oil and gas reached 69.8 percent and 45.3 percent, and is expected to continue rising in 2019, it said.