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Global Smelting Energy Expansion Speed Up Export of Refined Oil Needs Concerns

Global Smelting Energy Expansion Speed Up Export of Refined Oil Needs Concerns

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In recent days, although international oil prices have been operating at a high level of around US$70/bbl, the enthusiasm for global refinery expansion remains high. In May, the UAE announced that it will spend US$45 billion to build the single largest integrated refining and petrochemical complex in the world, increasing the refining capacity of the Consortium by 65% ??to 1.5 million barrels per day in five years. The rapid expansion of refining around the world will bring more fierce competition to China's refined oil exports.
 
According to a report from the China National Petroleum Corporation, the global refining capacity will exceed 5 billion tons/year by 2020. Among them, the new refining capacity in Asia Pacific and the Middle East will account for 80% of the global new capacity. China is one of the main forces for the surge in refining capacity in the Asia Pacific region, and the degree of surplus of refined oil resources will further increase. Only in 2018, China's oil refining capacity will increase by 36 million tons/year, and refined oil production is expected to increase by 4.8% from the same period of last year. This year, there will be 46.8 million tons of surplus refined oil products that need to win exports, an increase of 30.7% year-on-year.
 
This year, China's refined oil exports have reached new high levels, but they are unable to meet the needs of relieving domestic market surpluses and increasing exports. Up to now, the export quota for two batches of refined oil products has reached 43 million tons before 2018. Jinlianchuang statistics show that at the end of the first quarter, China National Petroleum Corporation, Sinopec Corp., and China National Offshore Oil Corporation (CNOOC) have all experienced insufficient quotas.
 
Experts in the industry believe that China's refined oil exports need to increase their sense of crisis in the long run.
 
First, global growth in refined oil consumption has not kept up with supply growth. In the world, the growth of refining energy is rapid, and the supply of refined oil is abundant. Although the recovery of the world economy will stimulate the growth of refined oil consumption, the substitution of new clean energy will inhibit traditional refined oil consumption.
 
Secondly, the annual export volume of refined oil in India, the Middle East, Russia, the United States, and other countries and regions are all over 50 million tons, each with its own advantages. The new refineries in India and the Middle East are connected to the East and West markets and are in a strategic location. Russia and the United States have obvious advantages in low-cost crude oil. The major target markets of China's current refined oil exports are mainly in the Asia-Pacific region, supplemented by markets such as Africa and Latin America, and are facing severe market competition.
 
Again, China's refined oil exports remain short-lived. The export variety, export quantity and other aspects are subject to the country's export quotas; the export quality is relatively single, and the products tend to be homogenous; the construction of export terminal logistics and other infrastructure and overseas sales networks needs to be upgraded.
 
To cultivate the competitive advantages of refined oil exports, it is also necessary for the country’s policy support and the active actions of related companies. The oil industry has been calling for the country to increase or gradually release refined oil exports. In the second half of the year, the continuous production of two major private-owned refineries and refineries, Hengli Petrochemical and Zhejiang Petrochemical, will increase the demand for the expansion of refined oil exports. The country needs to consider the healthy, coordinated and orderly development of the entire domestic oil industry chain from a long-term perspective.
 
Exporters of refined oil products need to improve their comprehensive export capabilities. Wu Chen, deputy general manager of China National Petroleum Corporation’s refined oil division, pointed out that on the one hand, export enterprises need to further improve logistics conditions, strengthen the upgrading of ports and storage tanks, build export bases to reduce export costs, and strengthen overseas Marketing network construction, efforts to expand the international market, ensure the smooth flow of export sales channels.
 
At the same time, export companies should pursue product differentiation, and their development philosophy should be in line with the market. “At present, China’s refined oil exports are mainly based on Euro V oil products. For some markets in the region, there is a problem of excess quality, and high quality may not be able to achieve higher prices. Exports of enterprises should be market-oriented, establish a business philosophy of selling and production, and adhere to Benefit principle: Arrange exports of marketable products; combine their own characteristics, and position their production of export products for high-end and low-end markets, respectively, to avoid loss of benefits due to excessive or insufficient individual indicators.” Wu Chen emphasized that “companies should increase their exports. To the strategic height, strengthen the spirit of planning and contract, and safeguard the credibility and brand influence of Chinese export enterprises in the international market.”

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