The future prospects of local refineries

Given the current situation in our country, local refineries should be able to survive for some time yet

There’s nothing to do but wait for the market to improve. There are no acquisitions either now. Reduce production and impose limits to ensure that the cash flow is not interrupted and production can continue. I hope that local refineries will unite to get through these difficult times, and avoid competing with each other over prices.

Only by uniting the local refineries to form a large group can they enhance their ability to withstand risks and overcome difficulties together.

Under the impact of Sinopec and CNPC’s efforts to build large-scale refineries, the market space has further shrunk. To achieve sustainable development, I believe it is possible to leverage the flexible characteristics of local refineries in order to develop one’s own unique strengths. Although it faces challenges in finding a breakthrough point, it can even transition to the chemical industry to carry out structural adjustments.

You may not be aware of it, but the source of raw materials for local refineries is an important factor; relying solely on **specifications is far from sufficient. Since Shandong Huaxing entered the foreign fuel oil market, local refineries have also tried to do the same. Now, the standard oil required for local refineries is not sufficient; therefore, they have to purchase fuel oil. However, a tax of 800 yuan per ton has to be paid. So, what should local refineries do? If local refineries fail to receive support from the local authorities, or fail to get the necessary upgrades and other forms of support, their path forward will be extremely difficult. In fact, the financial crisis is not the biggest problem. Just imagine: if a tax of 800 yuan is paid per ton, then a facility that processes 1 million tons would have to pay 800,000,000 yuan. And if it’s 5 million tons? Well, you can easily figure out that it would be 4 billion yuan. **Without changing policies, local refineries may soon go under. Please note: Fuel oil is the main raw material for refineries in most parts of the country, and it is also a widely used fuel by users such as ships and power plants, thus having a broad impact. However, since fuel oil is not mentioned in the draft for public comment released this time, there are doubts in the market as to whether it will be included in the scope of taxation. In response, a relevant official from the State Taxation Administration confirmed yesterday that fuel oil will be explicitly included in the scope of fuel tax collection. 　　Our newspaper’s reporters learned from Yimao Information, the largest provider of commodity information in China, that officials from the State Taxation Administration have confirmed that the “other refined petroleum products” referred to in the \"Proposed Reform Plan for Excise Duties and Taxes on Refined Petroleum Products (Draft for Comment)\” also include fuel oil. It is planned to apply the same excise tax rate to fuel oil as that applied to diesel; starting from January 1, 2009, this tax rate will increase significantly from 0.1 yuan per liter to 0.8 yuan per liter. 　　Based on these calculations, after the implementation of this plan, the consumption tax on each ton of fuel oil will be 811.6 yuan, which represents a significant increase of 710.15 yuan per ton compared to the previous rate of 101.45 yuan per ton ； Given that value-added tax still has to be paid on the consumption tax portion, the actual additional cost per ton of fuel oil amounts to around 830 yuan. Based on the average price of 2,300 yuan per ton for high-sulfur 180CST fuel oil in China last Friday, the consumption tax will account for as much as 40% of the total cost of fuel oil prices. 　　"This move will primarily impact local refineries that use fuel oil as a raw material for refining. "Analysts say. A person from a small refinery in Guangdong complained yesterday that the cost of imported raw materials is likely to soar in the future, and with a weak refined oil market, it is difficult to absorb such cost increases; therefore, a sudden and substantial rise in consumption taxes poses a severe threat to their survival. 　　Furthermore, some importers in the Huangpu area are concerned that if the consumption tax is eventually extended to fuel oil, it will lead to a sharp rise in import costs. The economic viability of fuel oil may also be significantly reduced, dealing a heavy blow to the demand for straight-run fuel oil or blended fuel oil. 　　As for other end-users, a representative from a power plant in Shantou said that since the economic efficiency of fuel oil once again surpassed that of coal and coal-water slurry, they were considering restarting the fuel oil boilers; however, if the consumption tax rises sharply, they may abandon this plan. Industrial users who have recently restarted their fuel boilers have also reverted to a cautious attitude. 　　Some fuel oil importers in East and South China have also stated that they will submit a petition to the National Development and Reform Commission, asking that the taxes related to fuel oil not be increased excessively. 　　However, the aforementioned analysts believe that **the goal of this reform is to reduce energy consumption and emissions; at the same time, efforts are being made to curb tax evasion through the distribution of fuel oil under false pretenses. As a result, it will be difficult for fuel oil to remain unaffected by these changes. 　　It is worth noting that some fuel oil importers have adjusted their delivery dates in an attempt to avoid the new consumption tax. The reporter learned from industry sources that a shipload of 40,000 tons of Thai low-sulfur waxy residue oil (LSWR), imported by a private fuel oil importer in Shanghai, was scheduled to arrive in Qingdao, Shandong, in early January 2009. However, in order to avoid a significant increase in the consumption tax on fuel oil that could take effect starting from January 1, 2009, the shipowner is making strenuous efforts to arrange for the import of fuel oil for the ship to be carried out as early as December. 　　It is estimated that by advancing the arrival of fuel oil in January to December, the cost per ton of fuel oil for this ship can be reduced by 830 yuan. 　　However, industry experts also believe that this approach of early delivery is limited to the shipments that were originally scheduled to arrive in early January. Due to various constraints such as suppliers, ship schedules, and contract changes, it is also difficult to implement this temporary tax avoidance method, so it has little practical significance.

Oil-based, oil-integrated, specialty products – a competitive advantage at a glance. . . :Lol, this is a necessary development approach for domestic refining. . . . Concise, with encouragement for applying for extra points. . . Haha. . . This post was last edited by wangsc on 2009-3-12 17:14]

Simply put, two words: “grow bigger.”

Let’s discuss whether, under the current circumstances, there is an oversupply With one large-scale refining project after another coming online, bringing both scale advantages and cost advantages, what is the future for local refineries?

Break through during the encirclement; if unable to do so, it’s best to shut the doors and be done with it

The market needs domestic refineries; they must strive for self-improvement and find a way to survive in tough conditions. Many companies have grown in this manner, and I believe that domestic refineries can do the same as well；

I think, under the strong pressure from state-owned enterprises, it is necessary to pursue vertical development. Such as the reprocessing of propylene. Only in this way can the greatest benefits be achieved.

In my opinion, local refining is a complement to the refining industry and has a promising future.

I think the path of combining oil refining with other activities is the way to go; small oil refineries cannot compare with large ones, as they have specific requirements regarding crude oil, and there are no additional taxes on crude oil. Moreover, the quality of small-scale refinery products cannot be guaranteed, so they simply cannot compete with those from large refineries. Therefore, raw materials should be provided for the company’s chemical production based on its own characteristics, in order to increase the value of the products. I’m currently working at a local refinery – a small one with a capacity of several hundred thousand units – but we focus more on chemical products. They are all the result of further processing of petroleum products; the output is not sufficient for internal use, so imports are necessary. I advocate for catalytic cracking to produce more light olefins, in order to supply raw materials for the chemical industry as much as possible. It has been three or four months now, yet we are still using the refining method; it’s really difficult.

Within China, Shandong does the best in terms of domestic refining, and it strengthens cooperation during crises. Now, by forming partnerships with CNPC or Sinopec, it can be said that the local refineries in Shandong are able to influence China’s refined oil market. With the support of local policies, the development prospects for local refineries in Shandong are very optimistic.

I think we can’t avoid being acquired sooner or later. Resources belong to **; the survival of resource-related enterprises depends solely on **’s approval. It’s only a matter of time, in the blink of an eye

The prospects for local oil refining are not optimistic; given the current shortage of oil, people are looking abroad for supplies. Well, without raw materials, it’s impossible to carry out refining

Looking at the history of structural adjustments in the global refining industry may help us analyze the current situation and make predictions about future trends. Over the past few decades, the focus of structural adjustment in the world’s refining industry has been on larger-scale plants and integration of refining and chemical production. With the emergence of a number of \"refining aircraft carriers,\" many small and medium-sized refineries were shut down or converted. Starting in the 1960s, developed oil refining countries began to carry out large-scale renovations of their refineries. By the late 1980s, market competition became increasingly fierce, and the trend toward larger scale operations was on the rise worldwide. Since the beginning of the 21st century, countries around the world have been adjusting the layout of their refining industries, closing small and medium-sized refineries that are not competitive, while upgrading or expanding existing plants. According to statistics, from 2000 to 2005, the number of refineries worldwide decreased from 756 to 674, a reduction of 82 over those 5 years, but the average capacity of refineries increased from 5.39 million tons to 6.11 million tons. The United States saw the greatest decline in the number of refineries, with 22 fewer over a period of 5 years. China, which has the second-largest refining capacity in the world, started its process of scale expansion later, and it has a large number of small and medium-sized refineries. Affected by local protectionism, domestic small and medium-sized refineries not only have a foothold to survive, but their exact number also remains a mystery. According to public reports, the number of refineries nationwide is said to be over 150, over 130, or over 120. By the end of 2006, there were 124 refineries in the country, but only 30 of them had a refining capacity of over 4 million tons, accounting for 71.5% of the total national refining capacity. Most of these large refineries were affiliated with the two major companies, China National Petroleum Corporation and Sinopec, with an average annual capacity of 4.32 million tons. The other 94 refineries, which account for 75% of the total number nationwide, have an average capacity of less than 1 million tons per year. To change this situation, the domestic refining industry has carried out structural adjustments in recent years. On the one hand, through upgrades and expansions, China National Petroleum Corporation and Sinopec have built a number of large-scale refining and chemical complexes with capacities of tens of millions of tons each; there are even \"refining giants\" such as Dalian Petrochemical and Zhenhai Refining & Chemical that have a refining capacity of 20 million tons. On the other hand, there is the shutdown of small refineries and outdated facilities. In 1999 and 2000, the then **Economic and Trade Commission shut down 111 oil refineries with a processing capacity of less than 1 million tons. In recent years, alone PetroChina has shut down 7 inefficient oil refining facilities and small refineries, including the Jiangnan Refinery in Jilin Petrochemical, the refinery at the Jilin Oilfield, and the Anshan Refinery. It has also discontinued and phased out 212 inefficient, energy-intensive, and high-risk petrochemical units. Structural adjustment is bound to be a difficult process, but historical trends cannot be changed.

The only option for local refineries is to pursue mergers and acquisitions with state-owned enterprises or large refineries. Judging from the current **energy development plans**, there is no intention of giving local refineries any room for operation. On the one hand, it causes significant pollution; on the other hand, it hinders energy conservation and emission reduction. Although home refineries were considered during the oil crisis, as long as resources are not in short supply, such industries are immediately pushed towards ruin – the consumption tax policy is a good example of this.

I am also an oil refiner, and a full-time employee at a large state-owned refinery. Personally, I don’t think the prospects for local refineries are that bleak! Firstly, local refineries also hold a crucial economic role in the region. Second: It has provided a large number of workers and unemployed people for local employment, making significant contributions to improving public order. Third: Local refineries can foster healthy competition within the local oil refining industry. Just imagine – if all local refineries in the country were owned by those two giants, who would then compete against them? The consequences would be catastrophic! If we want to survive, I think underground refining also needs to meet the following requirements: 1: It must be operated legally! ! ! ! 2: To become stronger, larger, and more efficient, it is necessary to make rational use of precious oil resources; where possible, carry out operations independently, and where that isn’t feasible, form partnerships. Efforts should be made to ensure that facilities are properly equipped, and to promote the deployment of plants for secondary processing and chemical production that generate high added value. Environmental protection is also essential, as workshop-style production methods will only lead to failure. Just imagine making the processing capacity even greater than that of Dalian Petroleum Plant No. 7, with a wider range of products – then see who would dare to stop it. 3: Maintain good cooperative relations with the locals to secure their support. 4: Improve the professional skills of its own employees, establish a positive corporate image, and enhance the company’s social responsibilities. Finally, I wish all of our petrochemical industry players, whether state-owned enterprises or local refineries, a successful passage through this economic crisis!

Let’s take a look at the **policies**. A person involved in formulating the plan for the adjustment and revitalization of the petrochemical industry said yesterday that, after the general principles of the plan were approved at a meeting of the State Council’s executive committee, the detailed rules are still being revised. The overall approach regarding oil refining companies is to encourage them to \"grow larger and stronger\". 　　During this year’s **”, Zhang Guobao, head of the **Energy Bureau, said publicly that as small refineries are phased out by the market or acquired by larger oil refining companies, China’s refining industry is set to undergo consolidation. This is a clear signal from the higher levels regarding the future trajectory of small oil refining companies in China. 　　According to the individuals involved in the planning process, an important principle in the petrochemical plan is to promote a combination of joint reorganization and the optimization of the industrial structure, which reflects a commitment to encouraging oil refining companies to grow stronger. “**An important goal of encouraging large refineries to integrate smaller ones is to avoid repeating the mistakes made in the iron ore negotiations. ”During a break in the meeting, the individual told reporters that China often finds itself at a disadvantage in international iron ore negotiations, largely because there are too many steel companies, resulting in a chaotic landscape of bargaining chips. 　　It is reported that CNOOC has previously been integrating its small refineries in cities such as Dongying and Weifang ； CNPC Group has also begun discussions with the refinery in Binzhou ； Meanwhile, Sinochem Group acquired some small refineries in Jinan. But not all local refineries are willing to be acquired by state-owned oil giants. The head of a local refining company in Jiangsu said yesterday that he was unwilling to be acquired, “because if that happens, the entire industry will lose its vitality, and the refined oil market will also lose its competitiveness.” 　　“It seems that there is a strong determination to integrate the refining industry; significant changes will take place in China’s refining sector in the coming years, with a greater emphasis on scale. ”An analyst at Xiwang Energy said that **in recent years, the construction and commissioning of refineries with a capacity of tens of millions of tons have been accelerated. In comparison, small refineries are inferior in both scale and strength. This reflects **an encouragement for the scaling up of oil refining. On the other hand, **the significant increase in the consumption tax on refined oil makes it even more difficult for local refineries that lack crude oil resources to purchase raw materials, resulting in severe losses. Under the laws of the market, small refineries without sufficient strength will inevitably be eliminated.