China's crude throughput to fall in July on independent refiner cuts, quota limits

China's crude throughput in July will likely fall slightly from the record high in June as expected cuts by private refiners over the month amid adverse weather offset the impact of mostly steady run rates at state-owned refiners.

The average utilization rate of China's four state-owned refineries was around 82% in July, steady compared with 82.4% in June, a four-month high, according to S&P Global Platts July 26. The four state-run oil companies -- Sinopec, PetroChina, CNOOC and Sinochem -- plan to process a total 32.06 million mt of crudes, or 7.58 million b/d of crude in July, against their nameplate capacity of 9.24 million b/d. This compared with their earlier plan of processing 31.07 million mt, or 7.59 million b/d, of crude in June.

Sinopec has stabilized crude throughputs by lifting its run rates one percentage point to 86%, up from 85% in June. Meanwhile, Sinopec's Luoyang Petrochemical in China's Henan province has also kept its utilization rate steady month on month at 85.3% in July. This comes even though the region was battered by days of intense rainfall and severe flooding.

"Our refinery is in a relatively high location ...There is no interruption due to the flood, and product transportation and sales will recover once the flood [is] gone," a source with the refinery said.

The overall run rate at PetroChina fell one percentage point to 73% in July from 74% last month. This comes despite its Jilin Petrochemical facility restarting late-July after completing a scheduled maintenance.

Most PetroChina refineries are located in northeast and northwest China neighboring oil blocks, which are also relatively less developed compared with centers in southern and eastern China.

In addition, because of a quota shortage, China is expected to cut its July oil products exports to just 1.15 million mt -- a six-year low -- leaving more barrels for the domestic market. As a result, PetroChina hardly exported any cargoes in July, and will likely not export much in August either, S&P Global Platts reported earlier.

Meanwhile, Sinochem and CNOOC have cut their run rates by about six and one percentage points, respectively, from June, also due to tepid local demand, according to sources.

China processed 14.86 million b/d of crude in June, rising 3.9% from the previous record high of 14.31 million b/d in May. It was up 5% year on year, showed data released July 15 by the National Bureau of Statistics.

August run rates under pressure

With the second batch of product export quotas still not released yet, not only PetroChina but Sinopec's refineries also will be short of quotas to export oil products in August, according to refinery sources. This will likely prevent them from maintaining stable run rates next month.

Sinopec's Gaoqiao Petrochemical will skip its gasoil exports in August due to a quota shortage. Its July gasoil exports stood at 30,000 mt. The refinery's jet fuel exports are expected to be 40,000 mt in August, steady on the month from July.

Other Sinopec refineries are also worried that without export quotas, they will probably have to cut crude throughputs to some extent next month.

"Due to the limited quotas, some refineries will have to cut crude throughputs slightly in August," said a source with a major Sinopec refinery in east China.

Platts data covered 41 stated-owned refineries in July, same as in June. These included 22 Sinopec refineries, 17 PetroChina refineries, CNOOC's Huizhou Petrochemical and Sinochem's Quanzhou Petrochemical refinery. The 22 Sinopec refineries covered by Platts have a combined capacity of 5 million b/d, accounting for 83.6% of the refining giant's total capacity of 5.98 million b/d. Data collected by Platts for PetroChina's refineries show a combined capacity of 3.49 million b/d, accounting for 85.3% of the company's total capacity of 4.09 million b/d.

Independent refineries

Independent refineries have generally cut their run rates by one to four percentage points.

The run rates at Zhejiang Petroleum & Chemical's three 10 million mt/year crude distillation units have been slightly lower to around 81% in July from 85% last month, according to company sources with knowledge of the matter.

The 20 million mt/year Hengli Petrochemical (Dalian) in northeastern China also has lowered its run rate to 105% in July, compared with 106% in June. The refinery's utilization rate has hovered around 106% in the past 12 months.

In addition, the weekly run rate at 43 small-sized independent refineries in eastern Shandong province was around 65.7% as of July 21, compared with 71.7% around June 24, according to local information provider JLC.

State-owned refineries' maintenance schedules

* PetroChina's Jilin Petrochemical has restarted around July 20 from a scheduled maintenance June 1-July 19.

* Sinopec's Cangzhou Petrochemical has restarted from a scheduled maintenance May 10-June 30.

* Sinopec's Maoming Petrochemical has restarted a 10 million mt/year CDU from maintenance June 10-July 19.

* Sinopec's Qilu Petrochemical will shut a 4 million mt/year CDU for maintenance for 50 days from Aug. 2.

* Sinopec's Shijiazhuang Petrochemical will be shut for overall maintenance from end-August to end-October.

* Sinopec's Guangzhou Petrochemical will shut an 8 million mt/year CDU for maintenance from mid-October to end-November.

* Sinopec's Gaoqiao Petrochemical will shut its entire refinery for maintenance Oct. 10-early December.

* Sinopec's Fujian Refining & Petrochemical will shut a 4 million mt/year CDU for maintenance from mid-October to mid-November.

Average run rates at China's top refiners:

Source: S&P Global Platts