Singapore, June 9th, 2011 - Chinese refineries have been suffering as international crude oil prices have remained high this year, and state enterprises have had to ramp up production to make up for the lost output from private refineries, the country's largest refiner, China Petrochemical Corp, said Thursday.
"The more they refine, the more losses they suffer. This is the plight for the local refining industry," China Petrochemical Corp., or Sinopec Group, said in a report on its website.
Sinopec said this is a major contributing factor in local private refineries to slashing output or shutting down for maintenance. With run rates by Shandong refineries falling by 70%, refined product supply has shrunk drastically.
Local retail prices for refined products, which are regulated, have not caught up with higher crude prices, causing Chinese enterprises to suffer huge losses in the refining sector.
Front-month ICE Brent crude oil futures have risen by 23.1% since the start of the year till the end of May, whereas domestic retail prices for gasoline and diesel have only gone up around 9-10% through two price increases -- in February and April.
In addition, recent surges in international oil prices -- keeping topping margins under pressure -- have led Chinese private refineries to drop run rates to an average of 30% of capacity.
This has burdened oil giants Sinopec and PetroChina with the responsibility to continue directing most of their output to the domestic market to ensure a steady supply at the retail level.
PetroChina, the listed arm of China National Petroleum Corp., reported a loss of Yuan 6.13 billion ($946 million) from its refining business in the first three months of this year, while Sinopec's listed arm Sinopec Corp. recorded an operating loss of Yuan 576 million by its refining segment.
"In accordance with arrangements by the head office, Sinopec's Qilu refinery operated at full capacity to maintain supply of refined products to the local markets," Sinopec said.
The 15 million mt/year (301,233 b/d) Qilu refinery, based in east China's Zibo city, Shandong province, processed more than 30,000 mt/day (219,900 b/d) of crude oil in May, the report said.
In May, the refinery produced close to 30,000 mt more products than a year earlier, the report said, without providing actual production figures. - Platts
"The more they refine, the more losses they suffer. This is the plight for the local refining industry," China Petrochemical Corp., or Sinopec Group, said in a report on its website.
Sinopec said this is a major contributing factor in local private refineries to slashing output or shutting down for maintenance. With run rates by Shandong refineries falling by 70%, refined product supply has shrunk drastically.
Local retail prices for refined products, which are regulated, have not caught up with higher crude prices, causing Chinese enterprises to suffer huge losses in the refining sector.
Front-month ICE Brent crude oil futures have risen by 23.1% since the start of the year till the end of May, whereas domestic retail prices for gasoline and diesel have only gone up around 9-10% through two price increases -- in February and April.
In addition, recent surges in international oil prices -- keeping topping margins under pressure -- have led Chinese private refineries to drop run rates to an average of 30% of capacity.
This has burdened oil giants Sinopec and PetroChina with the responsibility to continue directing most of their output to the domestic market to ensure a steady supply at the retail level.
PetroChina, the listed arm of China National Petroleum Corp., reported a loss of Yuan 6.13 billion ($946 million) from its refining business in the first three months of this year, while Sinopec's listed arm Sinopec Corp. recorded an operating loss of Yuan 576 million by its refining segment.
"In accordance with arrangements by the head office, Sinopec's Qilu refinery operated at full capacity to maintain supply of refined products to the local markets," Sinopec said.
The 15 million mt/year (301,233 b/d) Qilu refinery, based in east China's Zibo city, Shandong province, processed more than 30,000 mt/day (219,900 b/d) of crude oil in May, the report said.
In May, the refinery produced close to 30,000 mt more products than a year earlier, the report said, without providing actual production figures. - Platts
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