My views on oil product upgrading

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In recent years, oil refineries of all sizes in China have seen a surge in efforts to upgrade their oil products, and this trend has spread across the entire country over the past few years. Upgrading oil products is a positive thing; it improves the quality of fuel oils, reduces environmental pollution, and it is also the trend in the development of the global refining and petrochemical industries. But what I want to discuss here is that in China, especially in its current developing stage, the quality of crude oil processed there is poor, and the gap in terms of oil products continues to widen. There are regional differences in the quality of oil products, and the technology for refining oil is not yet very advanced. Although we have a strong capacity to process low-quality crude oil, China’s oil refining costs are still quite far behind those of the world’s most advanced countries. Is it in line with the national conditions to currently promote clean fuels vigorously and significantly reduce the sulfur content in petroleum products? Can all refineries afford the costs of oil upgrading? Will the public accept the resulting price increase? How significant is the impact of China’s upgrade in oil quality on the world’s environment? I can clarify my views on each of these issues one by one, and I hope everyone will join in the discussion. 1. Is improving the quality of oil in line with national conditions? The improvement of oil quality was introduced from the late 1980s, starting in Europe, then spreading to the Americas, as well as Japan and Asia. At that time, China’s automobile industry was just in its infancy, and a large number of foreign gasoline production lines were introduced; the standards for these lines, especially those regarding engines, were based on the Euro III standard. By the 1990s, Euro IV standards came into effect, and our country introduced production lines for Euro IV vehicles. In other words, Western developed countries are gradually raising the standards for gasoline used in their vehicles, while transferring their outdated design and manufacturing technologies and equipment to the Third World; China, on the other hand, is a huge market that accepts these outdated technologies. As a result, our country’s automobile industry saw massive imports; China essentially became a showcase for the world’s automobile production lines. There were hardly any state-owned enterprises engaged in independent research, development, design, and manufacturing of automobiles in China, and so this important task fell to private automobile companies, which bravely took on this responsibility. The Euro V standards that have been introduced in Europe and the United States, as well as the upcoming Euro VI standards, are also set to be implemented soon. As a result, many Chinese automobile companies will face another round of technological upgrades and the adoption of new technologies. Undoubtedly, it is our taxpayers who will have to bear these costs. Therefore, advancing the upgrading of oil products as quickly as possible is not in line with China’s national conditions, as China has not yet fully understood and mastered the technologies behind Euro III and Euro IV. 2. Can all refineries afford the costs of upgrading oil products? It goes without saying that many small refineries, especially those operating on a local scale, find it difficult to bear the costs associated with upgrading such oil products. Because improving the quality of oil products is the sum of the costs associated with various refining technologies, equipment, processes, catalysts, etc. The current upgrade for National V fuel is desulfurization. The main method for desulfurizing oils is hydrogenation; for gasoline, the S-Zorb process or similar adsorption-based desulfurization methods can also be used, while diesel and kerosene can only be desulfurized through hydrogenation. For desulfurization at levels III and IV, when hydrogenation is used, the catalyst activity, hydrogen pressure, hydrogen purity, and the material of the equipment all constitute standard requirements. When deeper desulfurization is needed, the catalyst activity must be increased, the process conditions adjusted, the hydrogen pressure raised, and the purity of the recycled hydrogen improved as well. In such cases, the hydrogenation equipment must be able to withstand the effects of hydrogen embrittlement at higher pressures; therefore, the materials used for the stationary and moving equipment on-site may need to be upgraded to a higher grade, which results in very high costs. Generally, the operational life of hydrogenation units in oil refining should be no less than 30 years. To switch to deep hydrogenation, many plants may need to install additional hydrogenation equipment and catalysts, and such capital investment is enormous. Of course, there are also certain advantages to this: those small-scale local refineries, unable to bear the cost of upgrading, close down, thus completing the task that Zhu Rongji undertook 20 years ago to eliminate such refineries. The three major oil companies aren’t worried; independent refiners are really having a tough time. 3. Can the public afford higher oil prices? The cost of upgrading the oil products must ultimately be passed on to the sales stage, meaning that it is the people who use the oil who have to pay for it. I often see some friends habitually criticizing the three major oil companies by comparing the price of refined oil in the United States with that in China. But this is indeed the case to some extent. More and more people in China own private cars, and driving requires money. Don’t pay attention to terms like hybrid or fully electric vehicles; it will still take some time before they are widely adopted. There are only one or two foreign brands that offer truly reliable hybrid vehicles, while our own ones are not good enough yet. And the number of people who need to buy cars or want to buy cars continues to increase, so oil consumption will surely rise. International oil prices won’t stay low for another two years; those who can’t tolerate low prices definitely won’t stand by, and they will take action against China. In the end, crude oil prices and petrochemical product prices will rise, which in turn will lead to higher prices for oil products in China and around the world. It’s tolerable, but the capacity to tolerate it varies; some people might stop driving, while others sell their cars. But there will still be some people who buy two or even three cars, as traffic jams and license plate restrictions exist; the wealthy, being willful, buy several extra cars as backups. 4. Let’s take another look at the extent to which China’s automobiles and petroleum products affect the environment worldwide Cars have been around for over 100 years, and heavy diesel locomotives have also been in use for more than 100 years. So what was the quality of fuel used back then? With low octane ratings, low cetane numbers, high sulfur content, and lead additives, and after being in use for nearly 70 years, it was only then that it became apparent that many of those highly polluting and toxic substances were caused by internal combustion engines; yet at that time, there were very few cars in China. Looking at the current global inventory of internal combustion engines, China accounts for only a small proportion, while developed countries account for the vast majority. Additionally, in the United States, many households still use fuel for heating and domestic diesel generators; this aspect is not taken into account in many statistics on vehicle pollution. The number of U.S. Air Force fighter jets is almost equal to the total number of those in other **, and those planes are not included in this count either. What I want to say is that, when accounting for pollution, we should start from the introduction of internal combustion engines; and since environmental pollution is a cumulative process, it’s better to start counting from the Industrial Revolution. By then, the developed countries in Europe and America had already polluted the Earth to an unbearable extent. When it was our turn to develop and become prosperous, they said we had to pollute less, and we had to follow their standards and their schedules, adhering to the rules they set. This is how modern powers act. We also don’t want pollution, but China’s development must follow a path similar to that of the West – an extensive form of development – because they refuse to sell advanced technologies, equipment, and manufacturing processes to China at lower prices; yet they give China such things as **** for free. Therefore, the upgrading of automobiles and vehicle fuels in China should not be rushed. China **should give its refining companies sufficient time to carry out this upgrading gradually; it is appropriate to maintain the standards for each type of fuel for 20 to 25 years. This approach is in line with China’s national conditions and helps to reduce refining costs. We can use the funds saved from upgrading fuels to prioritize the development of automobile research and design in China. The National VI standards should be implemented after 15 years, giving China’s refining companies a chance to catch up, while also helping to keep the cost of using vehicles low for Chinese drivers. At the same time, this approach provides China with more room to negotiate on the international stage regarding environmental protection and refining technology. Being relatively backward isn’t necessarily a bad thing; rushing to copy others’ practices is what’s truly problematic. Just my humble opinion; I hope everyone will discuss it.