I’m a little teapot — not!

Author Tom Reed

The phrase “as much use as a chocolate teapot”, describes something that epically fails to perform its intended function. And there are few instances to which the phrase is better suited than the use of the word “teapot” to describe refineries that account for as much as a third of China’s installed refining capacity.

The phrase “as much use as a chocolate teapot”, describes something that epically fails to perform its intended function. And there are few instances to which the phrase is better suited than the use of the word “teapot” to describe refineries that account for as much as a third of China’s installed refining capacity.

The “teapot” moniker appears to have evolved from “teakettle” — a term used to describe skimming refineries that simply boil fractions off at different temperatures. As much as 5mn b/d of refining capacity could fall into this category in China, of the country’s 15mn b/d total refining capacity.

Setting aside the quibble that liquid is stewed, not boiled in teapots, and that “storage” better covers crude left to stew, the refineries the term seeks to describe also do a lot more than just boil off fractions.

A survey by the government of Shandong province — home to half of the country’s so-called teakettle refining capacity last year — found that the sector boasted delayed coking capacity equivalent to a quarter of its crude unit distillation capacity. These plants need such sophisticated upgrading units because they have, traditionally, lacked access to crude and had to extract as much value as possible from very gunky feedstock.

The teakettle sector receives around 1.25mn b/d of crude but most of that goes to plants run by state-owned companies. PetroChina and Sinopec own a number of them, as do ChemChina, Sinochem and Norinco. So the term teapot — or even teakettle — fails to capture the relatively sophisticated nature of these refineries or describe a sector that is in some way private sector.

Perhaps the best definition of a refinery that the term “teapot” sought to describe was one which lacked the necessary licence to refine imported crude. But that explanation also faces obsolescence. Beijing has issued over 700,000 b/d of crude import quotas to teakettles since May, of which 490,000 b/d went to private-sector firms — the latest to Yatong Petrochemical, this week. The government is even going to open up the import regime, awarding licences to more than the five state-controlled firms currently permitted to bring crude into China.

Neither are all teakettles small in scale. The SDP Heze Dongming refinery is, currently, 230,000 b/d. The average size of the refineries receiving crude quotas will be 100,000 b/d after factoring in the closure of outdated capacity, which was a prerequisite for quota qualification.

The Chinese refining sector is evolving, and the terms used to describe it need to evolve too. Neither teapot nor teakettle, independent, small or lacking in crude adequately describes this section of the market, which is large, relatively sophisticated and increasingly well-supplied with feedstock. “Minor refiners” doesn’t cover it either, as so many are owned by Sinopec, Asia Pacific’s largest operator of refineries.

On balance, the only term that really does them justice is “refinery”.

For more information, please contact OilBlog@argusmedia.com

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