Chinese state-run refiners boost gasoline output

The firms are reducing diesel-gasoline ratios and boosting gasoline and jet fuel yields in an effort to support their margins

Chinese state-controlled Sinopec and PetroChina have continued taking measures this year to boost higher-value gasoline output while lowering diesel yields from their refineries, in an effort to maximise refining operating margins.

China's gasoline output increased by 3.9pc on the year to 3.35mn b/d in the first quarter — while diesel production fell by 4.5pc to 3.5mn b/d. The ratio of diesel to gasoline fell to 1.05 in the first quarter from 1.14 in the same period a year earlier. This follows a concerted effort by refineries operated by Sinopec and PetroChina to increase more lucrative yields of gasoline and jet at the expense of diesel. State-controlled refiners market most of their output through their own sales arms, giving them greater scope to set higher prices for products such as high-octane gasoline.

Sinopec plans to run 4.92mn b/d of crude in 2019, a slight rise from 4.88mn b/d last year. It is already producing more gasoline than diesel and that trend is likely to remain in place this year. And that, in turn, indicates that the firm's need for naphtha-rich crude will grow.

Sinopec's 314,000 b/d Guangzhou refinery started processing Yemeni light Shabwa crude in February. It began including light sour Abu Dhabi Murban crude in its slate in November. The Guangzhou refinery's gasoline output increased by 18.2pc from a year earlier to 78,000 b/d in January-February.

The firm's flagship 470,000 b/d Maoming refinery upped its intake of condensate, including Iranian South Pars in January-March, helping to push its diesel-gasoline ratio down to a record low of 0.872 in March compared with 0.91 a year earlier. The refinery processed 55,000 b/d of condensate in the first quarter, nearly triple its usage a year earlier. Vessel tracking data indicate that it bought 20,000 b/d of US light sweet WTI in March for delivery in May.

Sinopec plans to open five reformers with a total capacity of 135,000 b/d in 2019-20, while PetroChina will add a combined 183,000 b/d of reforming capacity at six refineries in the same period. A new 10,000 b/d reformer at Sinopec's 70,000 b/d Cangzhou refinery opened in mid-March, allowing it to increase gasoline output to 25,000 b/d from 17,000 b/d previously and producing over 1mn yuan/d in extra revenue.

PetroChina plans to increase crude runs to 3.21mn b/d in 2019 from 3.08mn b/d last year, suggesting that its gasoline output will be higher this year than in 2018, while its diesel production will be lower. PetroChina produced 1.06mn b/d of diesel and 1.01mn b/d of gasoline last year.

Changing ratios The firm's Liaoyang refinery completed upgrades in September allowing it to run an extra 40,000 b/d of light sweet Russian ESPO Blend. Liaoyang produced 58,000 b/d of gasoline in late 2018 compared with 18,000 b/d previously, and reduced its diesel-gasoline ratio to 2.6 last year from 4.17 in 2017. The ratio may fall to as low as 1.06 when all its upgraded units run at full capacity, and it will increase jet fuel output at the expense of diesel. PetroChina's newly expanded 200,000 b/d Huabei refinery will come on stream around June. It will then be able to produce up to 67,000 b/d of gasoline and 75,000 b/d of diesel.

Both oil giants are installing new hydrocrackers, reformers and alkylation units, or running units such as fluid catalytic crackers (FCCs), hydrocrackers and Z-sorb units at higher rates while reducing run rates at delayed coking units, in a bid to reduce the diesel-gasoline ratio. They are diverting straight-run gasoil from atmospheric distillation columns and catalytic diesel from FCCs for use as feedstocks for hydrocrackers, yielding more gasoline and jet fuel. But China remains oversupplied with transport fuels, exporting record amounts in March.

Diesel and gasoline output and yield 2018 2017 Sinopec Crude runs mn b/d 4.88 4.77 Gasoline mn b/d 1.42 1.32 Diesel mn b/d 1.32 1.36 Diesel ratio to gasoline 0.93 1.03 Gasoline yield % 28 26 Diesel yield % 26 27 PetroChina Crude runs mn b/d 3.08 2.79 Gasoline mn b/d 1.01 0.87 Diesel mn b/d 1.06 0.99 Diesel ratio to gasoline 1.06 1.14 Gasoline yield % 33 31 Diesel yield % 35 35

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