BEIJING Feb 19 Eastern China's Shandong
province has banned approvals of new oil refining projects, a
state oil major said, the latest move to tackle overcapacity in
the second largest oil consumer.
The ban comes on the heels of China's fuel consumption
rising at its slowest clip in more than 20 years in 2013, the
end to a decade of rapid demand growth that helped drive global
oil prices to over $100 a barrel.
While the fuel market cooled, construction of refineries
continued apace, leaving a capacity glut that hurt processing
margins and led to a rapid rise in Chinese fuel exports in 2013.
Shandong - home to a third of China's refining capacity -
holds refineries that can process 189 million tonnes of oil per
year, or 3.78 million barrels per day (bpd), oil major Sinopec
Group said on its website (www.sinopecnews.com.cn).
Refinery use rates in Shandong, however, stood at just 55
percent in 2012 due to a slowdown in economic growth and a lack
of crude for independent refineries, Sinopec's website quoted a
Shandong government commission as saying.
"Construction has resulted in a waste of resources,
intensified competition, lower prices, falling economic returns
and large amount of idle capacity," the Shandong development and
reform commission said, as cited by Sinopec.
No state refiners have refinery projects under construction
or pending approval in Shandong. It isn't clear how many
projects from independent refiners might be affected.
Shandong commission officials were not immediately available
Besides large refineries run by Sinopec
such as Qingdao and Jinan, Shandong also contains
the largest number of independent refineries, or the so-called
teapot refineries for their small size.
Independents teapot refineries in Shandong have been
expanding over the past few years to avoid being shutdown by a
central government policy aimed at closing down small crude
distillation units by end-2013.
Beijing will ban from March the construction of oil
refining, steel, cement and thermal power plants, as well as the
expansion of existing projects, the city government said last
month in a policy document aimed at tackling air pollution.
PetroChina has put off starting up two new
refineries - a 400,000-bpd joint venture with Venezuela and a
200,000-bpd plant in potential alliance with Saudi Aramco - and
delayed expansion of another to counter the threat of
overcapacity as oil demand growth slows.
BP is also dropping plans to invest in a refinery in
China, the fourth refining project in recent months to fall foul
of a slowdown in growth in the world's second-largest economy.
(Reporting by Judy Hua and David Stanway; Editing by Tom Hogue)