Currently, the United States is the largest oil refining nation in the world. Washington has up to five refineries that are capable of producing more than 500,000 barrels of derivatives every day. In addition, the country has a long list of small oil refining centers that give the US a refining capacity of 18 million barrels per day. It can be said that the US is a true energy power due to its domestic oil production, nuclear power, domestic refining, etc. However, as has been happening in recent years, China’s strong economic growth is causing increasingly obvious changes in the dominance of many sectors and industries of the economy. ..and oil refining is no exception. China has a plan to threaten US dominance as the world’s largest “oil refinery”.
Based on 2023 data. The US is still the largest oil refinery in the world, both in terms of oil refining capacity and the production of derivative products. The United States produced about 15.5 million barrels of petroleum products in 2023, compared with 15 million barrels in China, according to the latest report from the International Energy Agency. In terms of capacity (what refineries would produce if they were running at 100% capacity), the US can produce nearly 18 million barrels of derivatives per day, compared to China’s 17.3 million. This narrow difference between both powers could change this year.
China’s plan is taking shape
China has been importing huge volumes of oil for months now, sparking controversy and speculation among analysts and the media. One possible explanation for this phenomenon was that China may be hoarding oil increase the export of derivative products (gasoline, diesel, aircraft fuel…) to the rest of the world, taking advantage of the fact that global oil refining capacity is relatively limited by environmental regulations in the West (oil companies do not dare invest in the creation of additional oil refining capacity under the “legal uncertainty” that this sector faces in developed countries).
This theory is being explored by economists at Fitch Solutions, who believe China will work to take advantage of this vacuum, increase its refining capacity and gain market share in global refined product exports. China makes it clear: we don’t have enough oil to export, but we can buy it, refine it (generating added value) and sell it to the rest of the world.
“We expect China’s crude oil imports to increase in 2024 as the government increases import quotas for private refiners. 2015,” Fitch reports. This has been key as it allows refineries to plan their production and operate with greater confidence. Previously, quotas changed from time to time. Moreover, in 2022 and 2023, for example, quotas were an issue that prevented China from using its capacity to supply the world with diesel and gasoline, which was on the verge of a major energy crisis.
“The decision to increase import quotas for private refiners may be due to abundant supplies of discounted Russian crude oil. However, how much state refineries will import in 2024 remains a mystery. for refining, storage or marketing purposes and may adjust import volumes based on crude oil prices and domestic fuel consumption,” Fitch warns.
These experts say that China is increasing its refining capacity, so they predict that crude oil imports will remain high in the short to medium term. “China’s total oil refining capacity is expected to rise to 18 million barrels per day (b/d) in 2024.
as a number of key oil refining projects are planned to be launched,” Fitch assures.
Second project expected Sinopec expand Zhenhai Oil Refinery will be completed in 2024. After two successive expansions, the Zhenhai refinery’s capacity will increase to 840,000 barrels per day. The list is long, although in pure terms it is not as long as it seems, since some expansions correspond to the closure of some older terminals.
It should also be noted that the integrated petrochemical and oil refining complex Yulong Petrochemical in Shandong Province It will also begin commercial operation in December 2024. The design capacity for crude oil refining will be 400,000 barrels per day. In March 2023, Huajin Aramco Petrochemical announced plans to begin construction of an integrated refinery and petrochemical complex in Panjin, Liaoning Province. The complex includes a 300,000 barrels per day oil refinery and a 1.65 million tonne ethylene plant.
What about an electric car?
China is one of the countries that is betting the most on electric vehicles. However, the growing middle class is in the process of buying their first car…many of these cars are still internal combustion engine vehicles, so demand for fossil fuels in China is expected to continue to rise. “Despite the rapid adoption of electric vehicles, demand for transportation fuels is expected to continue to rise as vehicle ownership increases. crude oil imports,” Fitch explains.
These experts believe that China’s crude oil demand will increase further to 16.5 million barrels per day in 2024. China produces about 4 million barrels of crude oil per day, so it will have to import about 12 million barrels per day to meet all of this demand. . Overall, China could exceed 18 million barrels per day in terms of refining capacity.
This approximate figure doesn’t say much, but if you look back, you can see the impressive boom of this sector within the “Asian giant”, especially compared to the United States. In 2010, China’s oil refining capacity was just over 12 million barrels.
compared to more than 18 million that will be reached in 2024 if the said plan is implemented. In contrast, in 2010, US refining capacity was 17.7 million barrels. Today this capacity is only 18 million. In terms of efficient production, the IEA forecast the technical link between China and the US at around 15.6 million barrels per day in its January report.
The US and the West have generally stopped investing in this industry, which has been key to economic development in recent decades. However, both Europeans and Americans still need gasoline and diesel fuel every day. The difference is that now a significant portion of these derivatives will come from outside. Global pollution persists, but Westerners will send some of their disposable income abroad to continue filling the tanks of their cars.