China’s northeast sees upstream to refining shift

04 August 2016, Week 30 Issue 604

China’s northeastern provinces have seen a decline in oil production offset by crude processing growth as the local economy shifts towards refining and petrochemicals in response to upstream cutbacks by the state majors.

Crude production for the first half of 2016 in Heilongjiang, Jilin and Liaoning fell by 4.7%, 8.8% and 4.8% respectively year on year to 18.28 million tonnes (740,330 barrels per day), 3.2 million tonnes (129,590 bpd) and 5.08 million tonnes (205,685 bpd).

However, processing throughput increased by 3.8%, 24.5% and 1.9% to 8.295 million tonnes (335,920 bpd), 5.28 million tonnes (213,420 bpd) and 34.63 million tonnes (1.4 million bpd) respectively, Sina reported on July 28.

The figures for the northeast were part of a slight economic recovery, by 0.5 GDP points quarter on quarter to 6.7%, in an early sign that restructuring in the industrial provinces may be paying off.

Beijing is reportedly planning to axe 5-6 million state sector employees within three years to tighten industrial overcapacity, and some northeastern oil workers are almost certain to lose their jobs.

Daqing City in Heilongjiang, for instance, is heavily dependent on China’s oldest producing oilfield of the same name, but saw the value of oil and gas extraction fall by 0.9% year on year to 27.57 billion yuan (US$4.16 billion) in the first six months of 2016.

Daqing field lost more than 5 billion yuan (US$756.6 million) in January and February this year, according to Xinhua, and by 2020 its output will be reduced by 36% on 2003 levels to 32 million tonnes (640,00 bpd).

Better figures emerged for the city’s heavily invested petrochemical sector. The segment added 10.25 billion yuan (US$1.55 billion) in value during the first half, an increase of 3.7% year on year.

In April, PetroChina’s Daqing Petrochemical announced its first-quarter profit was the third highest of all the parent company’s refining subsidiaries, and the sector should be well-positioned to harness future demand growth.

International Energy Agency (IEA) research published in February suggested the Chinese chemical sector would grow in the period ending 2021 on the back of rapidly increasing product demand and Beijing’s aim of reducing China’s reliance on imported goods.

Edited by

Andrew Kemp


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