REFINERY NEWS ROUNDUP: China's Shandong refineries to slash August runs

London — China's Shandong independent refineries are likely to slash crude runs in August to about 70%, as their refining margins narrowed sharply from June/July, refinery sources and analysts told S&P Global Platts Aug. 11.

At least six independent refineries with a combined refining capacity of around 16.9 million mt/year plan to shut their crude distillation units for maintenance in August, the refiners said.

"The sector's average run rate will decline to below 70% because of those maintenance works," an analyst with local information provider JLC said.

This would be the second consecutive monthly fall in the run rates of independent refineries in August, after falling to 72.7% in July from 79% in June.

Crude imports for China's independent refineries hit an all-time-high of 19.81 million mt in July, with Zhejiang Petroleum & Chemical more than doubling its shipments from June, information collected by Platts showed. However, limited availability of crude import quotas and high inventory levels will likely cap the sector's import volumes for the rest of the year, industry officials and refinery sources said.

Japan's second-largest refiner, Idemitsu Kosan, said it expects its refinery runs to recover in the coming months after having fallen to 70% over April-June as a result of the state of emergency to curb the spread of the coronavirus.

Speaking to journalists on an earnings webcast, the general manager of Idemitsu Kosan's finance department, Yoshitaka Onuma, said the refiner's July refinery runs had increased from April-June.

"Refinery runs should improve going forward unless we return to the situation of April-May [during the state of emergency]," Onuma said.

Idemitsu Kosan's April-June refinery runs dropped from 80% a year earlier on plummeting demand for transport fuel during the April 7-May 25 state of emergency.

Idemitsu Kosan said it had seen signs of a recovery in demand for jet fuel as airlines had resumed some domestic passenger flights beyond July although the resumption of international passenger flights had been slow, a company official said on the webcast.

NEW AND ONGOING MAINTENANCE, UPGRADES UPDATE

UPGRADES

LAUNCHES

Near-term maintenance

New and revised entries

Japan

** Japan's largest refiner ENEOS expects to restart its sole 145,000 b/d crude distillation unit at the Sendai refinery in the northeast in mid-August, following a recent shutdown as a result of finding glitches at secondary units, a company spokeswoman said Aug.7.

** As of Aug.7, ENEOS has not restarted the No. 3 65,000 b/d crude distillation unit at the Kawasaki refinery after having delayed the restart from late June to the first 10 days of August. ENEOS restarted its 170,000 b/d No. 2 crude distillation unit at Kawasaki late July 31, having delayed its restart, a company spokeswoman said on August 3.

** Japanese refiner Taiyo Oil will run its sole 138,000 b/d Kikuma refinery in western Japan at around 80% of capacity in August, a source with direct knowledge said Aug. 7, up sharply from 60% over June-July when it was conducting statutory inspections while both crude distillation units were running. "We completed the maintenance by the end of July as planned and increased the run rate to 80% from this month," the source said. Regarding the run rate in September onwards, the source said: "We have not decided yet, but may keep the same run rate as August... [We will not raise the rate much higher] because we cannot put too much pressure on our units." Taiyo Oil had earlier planned to shut the 106,000 b/d No. 1 CDU at the refinery from early June and then the 32,000 b/d No. 2 CDU throughout July. However due to the coronavirus pandemic, the company postponed works that would have involved shutting down the CDUs to next year or the year after to coincide with large-scale regular repairs, the source said earlier. "We have shortened the period of maintenance, so the units still may have dirt and are not in perfect condition," the source said Aug. 7. A refinery source has previously said that it only carried out inspections that are legally required and that cannot be postponed, and other inspections will be carried out next year or two years later at the time of large-scale regular repairs.

Existing entries

China

** PetroChina's Jinxi Petrochemical has been shut for full turnaround over July 9-September 28.

** PetroChina's Ningxia Petrochemical has been shut for full turnaround over July 1-August 15.

** Sinopec's Maoming Petrochemical has shut a 5 million mt/year CDU for maintenance over mid-July to mid-August.

** PetroChina's Fushun Petrochemical shut for a full turnaround over late-June to mid-August.

** PetroChina's Yunnan Petrochemical will shut for a full turnaround from around mid-October.

Japan

** Japan's ENEOS will take more than one year to resume operations at its sole 136,000 b/d crude distillation unit at its Oita refinery in the southwest of Japan after it was hit from a fire May 26, 2020, a company official said June 18. The fire broke out during maintenance works, which started May 12. The crude distillation tower at the sole CDU was bent from around the middle by the fire.

** Japanese refiner Idemitsu Kosan on June 15 started scheduled maintenance at Hokkaido in northern Japan until mid-September after having shut the sole 150,000 b/d crude distillation unit on June 11, a company spokesman said.

** ENEOS has decided to terminate its refining operations at the 115,000 b/d Osaka refinery in western Japan and turn the facility into an asphalt-fueled power plant in October 2020, it said.

Upgrades

Existing entries

** Japan's second largest refiner, Idemitsu Kosan, plans to start work this summer on raising the residue cracking capacity at its 45,000 b/d FCC as it aims to increase LSFO output. Idemitsu Kosan's upgrade at the Chiba refinery was part of its response to the International Maritime Organization's global low sulfur mandate for marine fuels from January.

** China's Sinopec is looking to start commercial operation at its four newly built units in the central China located Luoyang Petrochemical in August, but the startup of the 2 million mt/year CDU expansion would be delayed to H1 2021, a refinery source said. The newly built residual hydrotreater, continuous reformer, aromatics extraction unit and hydrogen concentration unit have completed construction and were delivered May 30 to turn into commissioning, the company's official media Sinopec News reported. The project will facilitate the refinery to crack high sulfur crude oil in addition to current sweet crudes preference, and to extract every barrel into profit. Luoyang Petrochemical usually crack crudes from Middle East, West Africa, Latin America, and occasionally processes US crudes like WTI Mid-land, Mars, the refinery source said.

** Axens said its Paramax technology has been selected by state-owned China National Offshore Oil Corp. for the petrochemical expansion at the plant. The project aims at increasing the high-purity aromatics production capacity to 3 million mt/yr. The new aromatics complex will produce 1.5 million mt/yr of paraxylene in a single train, Axens said. The Huizhou petrochemical complex has been operating an Axens Paramax complex since 2009 with 1.3 million mt/yr of aromatics production.

** Construction of a new 1 million mt/year coker at Chinese independent refinery Haiyou Petrochemical, in eastern Shandong, has been put on hold, according to sources close to the refinery. The new coker was expected to come on stream in 2019.

** Sinopec's Jingmen Petrochemical in central Hubei province targets to start up its newly built 2.8 million mt/year heavy oil catalytic cracker on May 30, which is the key project for the refinery in 2020, according to the company's official social wechat platform. The 200,000 mt/year alkylation unit and the 550,000 mt/year lubricant hydrogenation unit have been online in H2 2019, according to company wechat. The alkylation unit was started up in July/August, and the lube unit in November.

** Sinopec's 21 million mt/year Jinling Petrochemical refinery in eastern China will build a new 600,000 mt/year vacuum distillation unit. It has reconfigured its No.3 gasoline hydrotreater to a 360,000 mt/year hydrotreater to produce RMG 380 CST bunker fuel oil with sulfur content no higher than 0.5%.

** Sinopec's Zhenhai refinery in Ningbo, eastern Zhejiang province, China, has issued four tenders for pre-construction works of its 1.2 million mt/year ethylene expansion project. The project also includes 15 million mt/year of refining capacity.

Launches

Existing entries

** China's independent refining sector is poised to cut back on crude oil imports from August as multiple private refineries are scheduled to dismantle their crude distillation units and hand over the capacities to a new 20 million mt/year project, industry sources told S&P Global Platts. The Shandong provincial government had previously set the startup target for the Yulong mega refining complex in Yantai city, eastern Shandong province, as 2022. The Yulong mega project has only recently received the green light from the country's top planner National Development and Reform Commission to start planning for the construction in June. The project aims to consolidate and upgrade mostly small-scale and scattered independent refinery systems in the province in a bid to compete with new giant complexes. These include the 20 million mt/year Hengli Petrochemical (Dalian), the 20 million mt/year Zhejiang Petroleum & Chemical, Shenghong Petrochemical, as well as state-run PetroChina's Guangdong Petrochemical and 10 million mt/year Sinopec Zhongke Petrochemical.

** KBR said it has been awarded a contract for catalyst supply for a vinyl acetate monomer VAM grassroot project at China's Shenghong (Lianyungang) refinery. The 300,000 mt/yr unit is a "key intermediate" for the production of polymers and resins for adhesives, coatings, paints, films, textiles and other products. In 2019, the refinery started construction of its 16 million mt/year (320,000 b/d) CDU and 3.1 million mt/year No.1 continuous reformer. Shenghong's refinery will only have one crude distillation unit with a processing capacity of 16 million mt/year, which will become the single largest distillation unit in China. The project is slated for completion in 2021. China's independent Shenghong Group has opened a trading office in Singapore ahead of the start-up in the second half of 2021 of its refinery in Jiangsu province.

** Saudi Aramco is boosting its downstream investments in China, creating a joint venture to build a $10 billion refinery.

** PetroChina officially started construction work at its greenfield 20 million mt/year Guangdong petrochemical refinery in the southern Guangdong province on December 5, 2018. Trial operations at the refining complex are expected to start in October 2021.

** China's coal chemical producer Xuyang Group has announced plans to build a greenfield 15 million mt/year refining and petrochemical complex in Tangshang in central Hebei province.