Refining Delays Slow Asian Jet Production Growth

Copyright © 2023 Energy Intelligence Group All rights reserved. Unauthorized access or electronic forwarding, even for internal use, is prohibited.

Asia-Pacific jet fuel demand continues to flounder with much of the region still battling the pandemic. But delays in ramping up the region's three largest new refineries in Malaysia and China should prevent the prolonged oversupply from getting worse. New production from those plants is not expected to start until the fourth quarter -- and only inch up slowly. The coronavirus outbreak in Malaysia and large cutbacks in crude import quotas for Chinese refineries are likely to delay the ramping up of a combined 1 million barrels per day of downstream capacity in those countries. In Malaysia, Petronas’ new 300,000 b/d Rapid refinery was preparing for a restart in the first quarter, after a second fire hit its 140,000 b/d diesel hydrotreater last March. A significant rise in throughput was projected by the fourth quarter (JFI Oct.26'20). But the plant has yet to resume operations. Recent indications that trial runs would begin in July or August are seen as optimistic by some market sources. Restart of the entire refinery is likely to happen at the end of the third quarter or in the fourth quarter, according to analysts. Repairs to the damaged hydrotreater, which strips sulfur out from straight-run gasoil, were supposed to be completed by the fourth quarter but have also been delayed. Malaysia’s worsening coronavirus outbreak has wreaked havoc with timelines for downstream expansion. The government imposed a full lockdown across the country on Jun. 1, which has been extended until new cases fall below a certain threshold. The Rapid plant has a design capacity for 28,000 b/d of jet fuel but is likely to produce less than 10,000 b/d by the fourth quarter, assuming the plant restarts by then. An optimistic view from one analyst shows that Rapid could be running at 50% of capacity by the end of the year under a best-case scenario. This would potentially mean jet output of around 14,000 b/d. At China’s 800,000 b/d Zhejiang Petrochemical refining complex, commonly known as the Rongsheng refinery after the name of its majority shareholder, the 400,000 b/d second phase was originally expected to reach commercial operations around mid-2021. Rongsheng’s 400,000 b/d first phase produces 65,000 b/d of jet while production from its second phase could be similar. China's Crackdown The Chinese government has reduced crude import quotas to clamp down on independent refineries, some of which are under investigation for alleged misconduct. The Ministry of Commerce (Mofcom) recently slashed Rongsheng’s second round of crude import quotas by 69% compared to last year, bringing its total allocation this year to 125 million barrels, according to Chinese consultancy JLC. Rongsheng’s first 400,000 b/d phase alone needs 146 million bbl of crude for the year, meaning the quotas leave it short of 21 million bbl of imported feedstock. Smaller allocations do not provide sufficient feedstock to continue operating the second phase and ramp it up further in the second half of the year. As part of the second phase, the refinery’s third 200,000 b/d crude distillation unit (CDU) has been increasing output since last November while the fourth 200,000 b/d CDU is nearing completion, said two market sources. The third CDU was thought to be running at around 70% in February and recently came close to reaching full capacity, according to a Chinese refinery source. Mofcom usually issues a third round of crude import quotas, but those volumes may also be reduced. These problems are likely to slow any increase in jet production from Rongsheng’s second phase (JFI Apr.23'21). China’s new 320,000 b/d Shenghong refinery has also yet to receive any crude import quotas despite plans to begin trial runs at the end of August, complicating its start-up. The plant is considering using domestic crude amid tight supply and increased competition from other independent refiners. Shenghong is not likely to be a major producer of jet fuel at the outset. The highly complex plant is designed to produce 60%-70% petrochemicals and more than 30% of transportation fuels, Energy Intelligence understands. Freddie Yap, Singapore Major New Asia-Pacific Refineries,

Oil Supply
Wanda Ad #2 (article footer)
A lawsuit filed this week against Delta in the US could make it more difficult for airlines to prove their sustainability credentials are legitimate.
Fri, Jun 2, 2023
The market seems to think Opec-plus' moves will be drowned out by sluggish demand and rising non-Opec supply.
Tue, Jun 6, 2023
Forecasts see stellar growth in oil consumption in the second half of the year, driven primarily by China.
Tue, Jun 6, 2023