Oil refinery refinement continues
( 2002-01-15 10:53) (1)
The Chinese Government is continuing its shutdown of inefficient small oil refineries this year to concentrate its oil processing capacity in a bid to sharpen the sector's competitiveness.
The government is also planning to absorb some small refineries into its two largest oil companies -- China National Petroleum Corp (CNPC) and Sinopec Group -- said an official with the State Economic and Trade Commission.
"We will encourage these refineries to stop operations and shift to other business, or merge into the two giants," said the official.
The move is expected to integrate China's refinery capacity, and to improve the two players' control of the market.
Sinopec and CNPC's refineries process more than 90 per cent of the crude oil in China.
The average refining capacity of domestic refineries only reaches 1.8 million tons a year, as compared with the world's average of 5.5 million tons.
Refineries with an annual production capacity less than 500,000 tons account for 62 per cent of China's refineries.
Analysts said low efficient refineries not only waste China's tight crude oil resources but cause serious environmental pollution.
They said if domestic refineries fail to improve their efficiency, they will suffer the consequences as more foreign refined oil - cheaper and of a higher quality - floods into the country following China's entry into the World Trade Organization.
Cao Xiaoxi, an oil analyst with a consultancy centre at Sinopec Group, said small refineries also produce low-quality products, which disturbs the market.
"They sell their products much lower than the government-pegged price, pushing down the two giants' profitability," said Cao.
Cao said the two giants welcome the government's efforts in concentrating the refinery capacity to ease the market glut.
The two giants' refineries suffered dismal losses last year with oversupply in the market.
The commission official said the integration of refineries will continue but gave no indication when the operation will end.
China has shut down more than 110 small refineries, each with a processing capacity less than 1 million tons, since 1999, reducing the annual refining capacity to 11.6 million tons.
|
