PetroChina will phase out 19 old chemical and refining units to reduce sector glut

Analysts say that PetroChina, a state-owned company, plans to permanently close 19 aging refining and chemicals units in order to reduce overcapacity. This is part of Beijing’s campaign to boost profitability and curb the country’s overcapacity.

Due to the rapid electrification, fuel demand in this country's transportation fleet is expected to increase faster than anticipated. Its petrochemical industry is also plagued with excess capacity and low margins.

Analysts who attended PetroChina's earnings conference last week said that the company will phase out 18 units over the next two decades that are no longer operating. One unit, which failed to meet safety requirements, has been in operation for more than 20 years.

The company spokesperson confirmed that the program was being phased out, but provided no further details.

The state-owned company is currently evaluating 309 of these old units to streamline its downstream operations. The remaining facilities are deemed low-risk and will continue to be operated.

Analysts said that PetroChina also assessed 43 crude distillation plants, including three units with capacities less than 40,000 barrels of oil per day.

The company will retain two of the three CDUs in its portfolio, as they convert heavy crude oil to lubricants. This niche product has a higher price than transportation fuels such as gasoline and diesel.

Analysts said that PetroChina has shifted its focus to higher-value petrochemicals such as materials for electric vehicles and solar power stations. It aims at joining the top league of chemical firms in the world by 2035.

PetroChina closed the Dalian Petrochemical refinery in northeast China that produced 410,000 barrels per day earlier this year as part of an ambitious project to replace it by a smaller plant at a different site.

Sinopec Corp, a top refiner, announced in August that it would eliminate inefficient small refineries and regulate the pace and size of chemical investment.

Beijing warned weaker refiners in 2023, when it pledged to eliminate plants with a capacity of less than 40,000 barrels a day by 2025. Beijing redoubled its efforts in September with a plan of work that called for the upgrading and modernization of ageing plants.

(source: Reuters)