China emissions, plastics use require refinery rethink
China needs to curb growth in refining capacity, phase out outdated refineries in favour of integrated plants, and reduce plastics use if it is to significantly reduce emissions from crude oil consumption by 2025, according to a new government-linked research report.
An increase in demand for petrochemical products has become the biggest driver of China's oil consumption growing and is producing a large amount of pollutants that need to be further reduced, government-affiliated industry consultancy the China National Petroleum & Chemical Planning Institute (NPCPI) and US-based environmental group the Natural Resources Defense Council said in the joint report.
The report suggested that China should cap refining capacity at 18.6mn b/d by 2025, up by just 4.5pc from state-controlled refining giant Sinopec's estimate of around 17.8mn b/d this year. Refineries with less than 100,000 b/d of capacity in east China and the Bohai bay regions should be consolidated, while the government should promote petrochemical industrial parks and diversify olefin feedstock sources, it said.
China may phase out 1.4mn b/d of refining capacity by 2025, mainly small plants in Shandong, Jiangsu and Hebei provinces, but add about 2.8mn b/d during the period — mainly large refineries that are likely to produce more petrochemicals.
Shandong's independent refining sector is crude-intensive but produces few petrochemicals, which China has to import to meet demand. The province had 4.46mn b/d of refining capacity but just 800,000 t/yr of ethylene capacity last year.
China could cut crude demand by 770,000 b/d by 2025 and 1.7mn b/d by 2035 through a series of measures including banning plastics, turning to alternatives and adjusting imports and exports, the report said.
The Chinese refining sector has raised output of ethylene and other petrochemical products to help meet a domestic shortage, encouraged by low feedstock costs. But global olefin capacity is rapidly expanding and lower demand as a result of the Covid-19 pandemic could exacerbate oversupply.
China would need to displace some of its oil-based petrochemical production with alternative non-oil feedstocks such as ethane to curb crude consumption. But this too faces challenges.
Price volatility and a lack of feedstock because of trade disputes is adding to uncertainty for ethane-based crackers. China's ethane-based cracking capacity may reach 2mn t/yr by 2022 and increase by another 1mn t/yr in 2023-25, with production reaching 2mn t/yr by then. Capacity will rise further and production will hit 3mn t/yr by 2030, the report forecasts.
Impact on crude demand ('000 b/d) | ||
2025 | 2035 | |
Demand side | ||
Plastics ban, raising reclyling rate of waste plastics, etc | 238.8 | 674.8 |
Increasing share of high-value products | 123.0 | 123.0 |
Substitution with alternatives | 30.6 | 130.8 |
Adjustment of import and exports | 0.0 | 100.0 |
Subtotal | 392.4 | 1,028.6 |
Supply side | ||
Consuming less oil to produce same chemical products | 117.4 | 200.6 |
Energy-saving technologies, smart chemical plants | 60.4 | 120.8 |
Reducing naphtha share, importing ethane and propane | 181.2 | 271.8 |
Advanced clean technologies | 20.0 | 40.0 |
Subtotal | 379.0 | 633.2 |
Total | 771.4 | 1,661.8 |
Source: NPCPI/NRDC |
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