Bloomberg News

China Faces Fuel Glut After Adding Refining Capacity, CNPC Says

January 30, 2013

China faces a fuel glut this year as new oil-refining capacity outpaces demand growth even amid a government drive to use more natural gas, according to the nation’s biggest oil and gas producer.

The nation’s crude-processing capacity will increase by 39.5 million metric tons a year to 614 million a year in 2013, while actual throughput will climb 5.4 percent to 489 million tons, China National Petroleum Corp. said in an annual report released in Beijing today. Demand for gasoline, diesel and kerosene will expand 5.8 percent to 293 million tons, it said. Crude is also turned into fuel oil and feedstock for petrochemicals.

China, the world’s second-largest oil consumer, processed a record 10.2 million barrels a day in December, according to data from the Beijing-based National Bureau of Statistics. Refiners have stepped up operations amid a rebound in economic growth just as the government encourages the use of cleaner-burning gas to curb pollution. Gas demand will advance 12 percent to 165 billion cubic meters this year, CNPC said

“If refining rates keep rising, the domestic fuel market might witness an obvious oversupply,” CNPC said in the report. “Gas demand for power and industrial use will grow steadily.”

Apparent oil demand, or domestic processing plus net imports of refined products, will increase 4.8 percent to 514 million tons this year, CNPC said in the report. Net overseas purchases of crude will advance 7.3 percent to 289 million tons and account for 58 percent of consumption, it said.

Import Dependency

China’s crude imports will be capped at 61 percent of total demand through 2015, the State Council, or cabinet, said in a statement on Jan. 24. The ratio averaged 57 percent in 2012.

Imports of gas by sea and pipeline will rise 24 percent to 53 billion cubic meters in 2013 and account for 32 percent of total consumption, according to the report. Liquefied natural gas shipments are predicted to increase 15 percent to 16.5 million tons, while pipeline deliveries will gain 32 percent to 30 billion cubic meters.

China’s economy will expand 8.1 percent in 2013, according to the median estimate in a Bloomberg survey this month. Growth was 7.9 percent in the three months ended December, snapping a seven-quarter slowdown.

To contact Bloomberg News staff for this story: Sarah Chen in Beijing at schen514@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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