What opportunities and challenges will the Chinese refining industry face?

The refining industry is facing an energy transition and a low-carbon transformation. Coal, oil, natural gas, renewable energy, and nuclear energy are the five most widely used energy sources in China at present. Under the \"dual carbon\" goals, energy reform requires transforming the traditional energy system based on fossil fuels into one that is dominated by renewable energy sources and features a combination of various energy types, thereby promoting the upgrading of China’s energy sector and related industries. 　　To achieve the \"dual carbon\" goals, energy is the key area of focus; the petrochemical industry, as a pillar industry in China, is also one of the major sources of carbon emissions. Therefore, China’s refining industry faces a significant task in achieving a low-carbon transition. As both an energy producer and an industry that generates substantial amounts of energy consumption and carbon emissions, it is necessary to strictly prohibit the expansion of production capacity for products that are energy-intensive and result in high carbon emissions. Efforts should be made to phase out outdated production capacities, promote the use of new green, energy-saving technologies, processes, and equipment, and intensify efforts in developing a circular economy as well as in reducing energy consumption and emissions. These measures aim to foster the creation of low-carbon industrial chains and supply chains within the petrochemical sector, with the goal of reaching carbon peak levels ahead of other countries.

Guide the orderly withdrawal of inefficient production capacity and strictly control refining capacity. According to statistics, a number of integrated refining and chemical projects will be built between 2022 and 2026, such as the Zhenhai expansion project, as well as projects by CNPC in Guangdong and Hainan. It is estimated that China’s total new refining capacity will amount to 98 million tons per year; taking into account the capacity that will be phased out, China’s total crude oil processing capacity will reach 1.06 billion tons per year. In the future, China also plans to develop a number of large-scale integrated refining and chemical plants, such as the second phase of Gulei Petrochemical, the second phase of Sinochem Refining & Chemical, Tianjin Nangang, Yueyang, CNPC Guangdong, Dalian Petrochemical Xizhongdao, and other large-scale integrated refining and chemical projects as well as renovation and expansion projects. If these projects come online, China’s crude oil processing capacity will exceed 1.2 billion tons. 　　In accordance with the requirement of 1 billion tons per year stipulated in the Notice on the Action Plan for Reaching Carbon Peak by 2030, to achieve the overall target of 1 billion tons, it is necessary to accelerate the phasing out of refineries that exceed the registered capacity limit, those with a capacity of 2 million tons per year or less, as well as idle and underutilized production capacities. According to statistics, there are 107 refineries with a processing capacity of 2 million tons per year or less, giving them a total primary refining capacity of 74.72 million tons per year. If the refineries with a capacity of less than 2 million tons are shut down, it is estimated that an additional 150 million tons of primary refining capacity will be eliminated in the next five years.

Integrated refining and chemical processing facilities have been put into operation on a large scale, accelerating the transformation and upgrading of this industry. In recent years, as automotive fuel efficiency standards have improved, new energy vehicles have developed rapidly, and there has been an increasing demand for better living standards, the global demand for petroleum products has slowed down while the demand for petrochemical products has increased. However, basic organic chemical raw materials such as aromatics and olefins remain in short supply, prompting refineries to pursue transformation and upgrading. At the current stage, there are mainly two approaches to the transformation of oil refining into petrochemical processing: integrated petrochemical operations and the technology of directly cracking crude oil to produce ethylene. 　　Given that integration of refining and chemical production offers advantages such as reducing production and raw material costs, expanding sources of petrochemical feedstocks, enhancing production flexibility, and enabling product diversification, and considering the characteristics of China’s refining facilities—which often use high-sulfur, high-acid, and heavy crude oils as feedstocks—most Chinese refineries opt for integration of refining and chemical production as part of their chemical transformation efforts. 　　According to statistics, there are 28 large-scale integrated refining and chemical enterprises in China, with 5 such plants under construction. The total refining capacity of these enterprises is 449.2 million tons per year, while their ethylene production capacity is 29.85 million tons per year. Of these, 23 integrated refining and chemical enterprises are already in operation; their total refining capacity is 378.2 million tons per year, and their ethylene production capacity is 22.65 million tons per year. The combined capacity of these integrated refineries and chemical plants accounts for 37.77% of the country’s total capacity. China has also planned integrated refining and chemical projects in places such as Tianjin Nangang and Yueyang; in the future, the number of such integrated plants is set to exceed 30. Independent refineries are also focusing on the upgrading of integrated refining and chemical processing capabilities, such as Lijin Petrochemical, Xintai Petrochemical, Sinochem Hongrun, Jincheng Petrochemical, and Jingbo Petrochemical. 　　In the future, the overcapacity in China’s refining sector is bound to become even more severe, which will lead to a new round of changes in the distribution pattern of refined oil products. Furthermore, as foreign companies continue to enter China’s petrochemical market, external competition is intensifying. This will not only exacerbate the surplus of refined oil products but also lead to a surplus in the production capacity of basic chemical products such as aromatics and olefins. Therefore, the transformation and upgrading of the refining industry involves more than just reducing oil production and increasing chemical production; rather, it requires the industrial chain to move towards higher-value segments, by adopting new technologies such as direct cracking of crude oil to produce ethylene, and by developing new integrated models that focus on the production of high-value-added products and the expansion of the petrochemical industry chain.

In the medium to long term, the refining industry is affected by the goals of achieving carbon peak and carbon neutrality; it is now necessary to pursue a green development path through energy transformation. Given the high energy consumption and high pollution levels associated with the refining industry, the following approaches can help achieve carbon peak and carbon neutrality. 1. Optimize from the aspects of process flow and compact equipment layout ； 2. The location should be chosen carefully, preferably in areas with abundant renewable resources such as wind and solar energy, so that wind and photovoltaic power generation can be utilized; part of the water can be electrolyzed to produce hydrogen for use by the refinery and surrounding facilities ； 3. Choose efficient, low-energy-consuming equipment ； 4. Optimize system energy through process integration and enhancement methods as well as pinch analysis strategies ； 5. In terms of environmental protection, advanced technologies are used for sulfur recovery, and the ammonia method is employed to convert sulfur in the exhaust gases into ammonium sulfate, ensuring green and environmentally friendly practices ； 6. Conduct advanced refining processes in light of practical applications ； 7. Develop advanced hydrogenation process technologies, catalysts, and corresponding reactors ； 8. Development of FCC flue gas coking treatment technology.

In general, the market for refined oil will continue to shrink

There are great opportunities, as well as significant challenges. Keep going, press on with determination ； Relatively speaking, our industry is quite suitable for individuals to grow in ；