PetroChina plans to phase out production at 19 old and inefficient units across its refining and petrochemicals facilities as China looks to trim overcapacity that has weighed on the downstream sector.
PetroChina, the second-largest refiner in the country after Sinopec, will permanently shut an old refining and chemical unit that hasn’t met safety standards and will phase out additional 18 units with more than 20 years of operational life, analysts who attended PetroChina’s Q3 earnings call told Reuters on Thursday.
China and its refiners and petrochemicals producers have been struggling with low margins amid overcapacity and falling demand for road transportation fuels. The Chinese authorities have stepped up efforts to curb the overcapacity that has led to refining losses and thin petrochemicals margins amid the glut in producing units that has overwhelmed the entire Asian market.
PetroChina said in its Q3 earnings that its gasoline production fell by 4.8% between January and September from a year earlier, while diesel output was flat on the year. The only transportation fuel that saw rising production – and demand – was jet fuel, whose output at PetroChina’s refineries jumped by 9.5%.
This year the company continues to “advance its transition toward the mid-to-high end of the refining-chemicals new materials value chain,” PetroChina said.
Refining and chemicals firms have not been spared from the so-called “involution”, which refers to excessive and self-defeating competition among Chinese companies for limited resources and opportunities.
Chinese refiners have been struggling with both overcapacity and lackluster domestic fuel demand so far this year.
China has promised to address the overproduction that is creating hardships for its oil refining and steel-making industries.
As a result of the destructive competition and price wars, oil refiners and steel-makers have been the worst performers in terms of earnings among industrial companies, according to data compiled by Bloomberg.
By Tsvetana Paraskova for Oilprice.com
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