SINGAPORE: China’s Sinopec, the world’s biggest refiner by capacity, aims to cut throughput by more than 10% from its original plan this month in response to a drop in crude supply caused by the war in the Middle East, two sources familiar with its operations said.
The cuts by state-owned Sinopec, which accounts for a third of China’s refinery output, a conduit for 20% of the world’s oil, are part of Beijing’s broader measures to prevent disruption to oil supplies caused by Iran’s blockage of the Strait of Hormuz.
The two sources estimated that throughput is likely to fall by an average of 600,000 to 700,000 barrels per day (bpd) in March, adding that the cut does not include losses from planned plant maintenance before the start of the Israel-US war on Iran on February 28.
A Sinopec representative said the company does not comment on operational matters.
Sinopec imports about 4 million bpd of crude, of which 2.4 million bpd comes from the Middle East, including regular shipments under annual contracts from Saudi Arabia, Kuwait, Iraq and Qatar.
China, the world’s biggest oil importer, brought in 11.55 million bpd last year, almost half from the Middle East.
Beijing took measures to reduce supply
This week, Beijing ordered an immediate ban on exports of diesel, gasoline and aviation fuel to prioritize domestic supplies. It also rejected Sinopec’s request to tap government-controlled oil reserves, Reuters reports.
One of the sources said the planned cuts represent a decline of 11% to 13% from the initial plan to process 5.2 million bpd in March.
“Sinopec has no choice but to cut the runs immediately and immediately,” the second person said.
In Asia, which buys 60% of its oil from the Middle East, refiners have already closed at least 1 million barrels of capacity since the start of the war, Reuters reported.
Consultancy IIR said on Tuesday that about 1.9 million bpd of the Gulf’s refining capacity had been shut down due to the war.
Fuel given priority over pet chemicals
In another move to address domestic fuel shortages, Sinopec will focus on maximizing fuel production at the expense of petrochemicals output, which enjoys weaker margins, four people familiar with the matter said.
Sinopec’s operating cuts include the shutdown of an 80,000-bpd crude unit at its Fujian Refining & Petrochemical Corp unit last week.
That facility has cut operations at its 1.1 million ton-a-year steam cracker by 20% to 30%, two of the people said this week.
Separately, Sinopec’s Zhenhai Refining and Chemical Corp has also reduced the operating rates of both its steam crackers to about 70-80% of their combined capacity of 2.2 million tpy, one of the sources said.
On Monday, Sinopec-invested Fujian Gulei Petrochemical closed its entire complex, including a 1.1-million-tpe steam cracker, for maintenance until April, the company said in a notice.
Asia’s naphtha market is grappling with supply shortages as the region sources about 60% of its petrochemical feedstock from the Middle East, with cuts in steam cracker operations and force majeure being announced since last week.
