CNPC to mothball refinery in Xinjiang for environmental, safety reasons

SINGAPORE/BEIJING (Reuters) - China National Petroleum Corp (CNPC), the country’s largest state-owned oil and gas company, said on Wednesday it will permanently close a small refinery in China’s northwest after the plant failed to meet environmental and safety standards.

The Taxinan refinery, in the northwestern Chinese region of Xinjiang, will be mothballed from June 30, one of the first and few refining facilities CNPC has shut down amid China’s tightening environmental scrutiny and fuel upgrading.

“Despite multiple retooling works, the plant carries hidden dangers and also fails to keep pace with the nation’s fuel upgrading program,” CNPC said on its website on Wednesday.

The refinery, located in Zepu county of the Kashgar region, is affiliated with CNPC’s oilfield in the Tarim basin of Xinjiang. It has annual crude processing capacity of 500,000 tonnes, or 10,000 barrels per day.

Harry Liu, a senior downstream analyst with IHS Markit, said another reason for the closure is that CNPC realized a plant of such small scale could no longer compete in an already over-supplied domestic fuel market.

“They could well invest in fuel upgrading to meet the environmental standards, but will that be worth it?” said Liu.

By closing the Taxinan plant, CNPC could send more crude oil to the larger and more efficient Sichuan refinery in the southwest for optimization, he added.

In 2015, China Petrochemical Corp, parent of Sinopec Corp, closed a similar small refinery in the northern city of Xi’an.

Reporting by Chen Aizhu in SINGAPORE and Zhang Min in BEIJING; Editing by Shreejay Sinha and Christian Schmollinger