China's state-owned refiners lift run rates to 80% in June from 76% in May - Platts survey

Singapore — China's state-owned refineries Sinopec, PetroChina, CNOOC and Sinochem have ramped up crude throughput to average 80% of capacity in June from 76% in May as profit margins increased, a monthly survey by S&P Global Platts showed June 19.

Their June runs are also higher than the 79% recorded in the survey a year earlier, the data showed.

"We have lifted our crude runs as we finally start making money this month - when all the high-cost feedstock was finished and we started to crack the cheap crudes that we booked in March," an Anhui-based Sinopec refiner source said.

Moreover, "as crude prices moved to around $40/b, the Price Adjustment Risk Fund that state-owned refineries need to pay is less than before, when crude prices were far below $40/b, so we can keep more profit," a Shandong-based Sinopec refiner source said.

Beijing collects a Price Adjustment Risk Fund contribution on gasoil and gasoline sales when a basket of crude oil prices falls below $40/b. The payment changes in line with the price gap between $40/b and the actual average price of the basket of crudes over 10 working days. Guidance retail prices for gasoline and gasoil are set at a level corresponding to a crude price of $40/b.

In the state-owned sector, PetroChina led the recovery with a five percentage point increase in run rates from May, while Sinopec and CNOOC each raised rates by three percentage points.

The higher throughput comes despite two big refineries, PetroChina's 2.05 million mt/year Dalian Petrochemical and Sinopec's 13.8 million mt/year Tianjin Petrochemical, undergoing maintenance since May.

In total, 32 of the state-owned 38 refineries surveyed across the four companies have raised run rates in June. These refineries, with a combined capacity of 8.6 million b/d, plan to process 6.9 million b/d of crude in June. Platts' June survey canvassed 19 refineries under Sinopec, 17 under PetroChina, CNOOC's Huizhou refinery and Sinochem's Quanzhou refinery.

The survey included the 8.5 million mt/year Sinopec-SK Wuhan Petrochemical refinery in Hubei, the province most affected by the coronavirus pandemic, which plans to run at 105% of its capacity in June, up from 93% in May, 61% in April and a floor of 59% in March, the data showed.

Seven refineries with a combined capacity of 1.49 million b/d reported operating above 100% capacity in June, accounting for 17% of the surveyed capacity. This compares with three refineries last month.

SMALL INDEPENDENTS LOWER THROUGHPUT

In the independent sector, Zhejiang Petroleum & Chemical continued to boost run rates to nearly 130% of its nameplate capacity of 20 million mt/year in June, up from around 120% in May, while the 20 million mt/year Hengli Petrochemical (Dalian) maintained rates at around 115% in June, stable from May.

The 45 small-scale independent refineries surveyed in Shandong province lowered their average run rate to around 75% as of June 17 from a record high of 78% in May. Their refining margins narrowed when crude prices rose to around $40/b, according to local information provider JLC.

These refineries badge most of their gasoline and gasoil sales as petrochemical products to avoid paying the Price Adjustment Risk Fund, meaning they earned more earlier in the year when crude prices were well below $40/b.

China's state-owned and independent refineries cracked a total 13.69 million b/d of crude in May, rebounding 4.1% from 13.16 million b/d in April and up 15.7% from 11.83 million b/d in March, when the country started to ease lockdown restrictions to contain the coronavirus outbreak, data from National Bureau of Statistics showed.

STATE-OWNED REFINERS' SCHEDULED MAINTENANCE, RESTARTS IN 2020

** Sinopec Zhenghai Petrochemical shut its 10 million mt/year CDU for maintenance in mid-May after restarting the 8 million mt/year CDU from maintenance in early May

** PetroChina Dalian Petrochemical in northeastern Liaoning province will restart after overall maintenance around June 23

** Sinopec Tianjin Petrochemical will restart from maintenance in early July after shutting its 2.5 million mt/year and 10 million mt/year CDUs from late April

** PetroChina's 7 million mt/year Jinxi Petrochemical will shut for full turnaround over July 9-September 28

** PetroChina's 5 million mt/year Ningxia Petrochemical will shut for full turnaround over July 1-August 15

** PetroChina's 13 million mt/year Yunnan Petrochemical will shut for full turnaround from around mid-October

Average run rate at China's top refiners:

Source: S&P Global Platts