China refiners curb fuel output after massive new plants stoke glut
China’s fuel producers are making extended curbs to their output in the third quarter after supply from mammoth new refineries stoked an already-sizeable glut, potentially dragging on crude oil demand from the world’s biggest importer of the commodity. Private refiner Hengli Petrochemical ramped up its 400,000-barrels per day (bpd) plant in northeast China to full capacity in May, while Zhejiang Petrochemical began trial runs around the same time at a similar-sized refinery on the east coast. In the wake of that wave of fresh supply and amid slowing local demand for fuels such as gasoline and diesel, refiners are cutting their crude processing, or throughput, industry sources and analysts said. That drop should sap their appetite for crude imports, pulling down on international oil prices that have already been hit by fears over a slowing global economy. The swollen surplus of fuel products could also send China’s fuel exports surging to new highs and further pinch Asian refining profits. “For markets that are already consumed with fears about a global recession … headline numbers of oil demand growth slowing alongside talk of run cuts seem to reinforce a bearish narrative,” said Michal Meidan, a London-based analyst at Energy Aspects. Small-scale refiners known as ‘teapots’, mainly located in Shandong province, are coming under the most pressure to make fresh output cuts, analysts said, extending curbs many of them made in May and June. Teapots have been seen as a bellwether for China’s oil demand since 2015 when they became first-time crude oil importers. They now make up a fifth of the nation’s total crude imports. Dongming Petrochemical Group, the province’s largest independent refinery, is closing its 240,000-bpd plant this week for two months of maintenance in the wake of “poor margins”, according to a company source. That comes after plants were losing 300-350 yuan ($44-$51) on each tonne of crude oil they processed in June, their largest such loss in nearly four years, said Shi Linlin, an analyst at consultancy JLC, and analyst Wang Zhao at Sublime China Information, another consultancy in the province. Seven plants in Shandong – including Dongming – with a total crude processing capacity of 470,000 bpd will be offline in July for overhauls, JLC estimates. That’s equivalent to a throughput cut of 14 million barrels of crude in July alone, or nearly 4 percent of the country’s processing levels in May. Meanwhile, two major coastal plants run by Sinopec Corp, Asia’s largest refiner, are planning to trim throughput by nearly 2%, or roughly 10,400 barrels per day, in July-September from the second quarter, plant sources said. That comes after these two plants were hit by refining losses in June for the first time this year. Sinopec did not respond to a request for comment. All refinery sources declined to be named as they were not authorized to speak to the media. ONSLAUGHT FROM HENGLI The losses at small refiners come a month after behemoth Hengli cranked up operations at its plant in the northeastern port of Dalian. Hengli, traditionally a polyester maker, shipped its first gasoline cargo in early June. That was 80,000 tonnes sold to Sinopec at 5,300 yuan ($769.48) a tonne at an ex-plant rate, which is 700 yuan, or 12 percent, below prices offered by Shandong teapots, said two sources with direct knowledge of the transaction. The refiner in June placed a total of over 500,000 tonnes of gasoline at 300 to 500 yuan a tonne below market rates on average and sold a similar amount of off-specification diesel fuel with smaller discounts as its fuel quality has yet to stabilise, the sources said. “We were indeed marketing at promotional rates to build our customer base. But this is a temporary marketing strategy as we are new to the market,” said a Hengli spokesman, without elaborating. The Hengli and Zhejiang plants are together expected to account for about 6.4 percent of total Chinese crude oil throughput.
Bangladesh protests against gas price rise
Bangladesh’s Left Democratic Alliance led a protest against the government’s raising of the price of natural gas, which took effect last week. Almost all the oppositions, including the country’s largest opposition Bangladesh Nationalist Party, supported the protest. Activists of the alliance blocked key intersections in the city and disrupted transport. Police temporarily detained some workers of the party. The state-run Bangladesh Energy Regulatory Commission last week raised natural gas prices by 32.8% on average for all users effective from July 1, the first day of the country’s fiscal year, the head of the Commission said. Khalequzz Zaman, the secretary general of the Bangladesh Socialist Party said that if the government did not withdraw the decision that would hurt the poorest most, its members will besiege the ministry of power, energy and mineral resources next Sunday. “After that we will continue different protests in the country,” Khalequz said at a protest meeting in the city. The business community was also protesting against the decision to raise the gas price, a critical input for the industry. Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said that the gas bill will take up around 1.5% of the manufacturing cost after this hike, an almost 1% increase in production cost. “This may not sound much in terms of percentage, but for an industry struggling for every penny this will be another blow,” she told reporters. The readymade garment is the backbone of Bangladesh’s economy. Bangladesh’s textile industry earns about $30 billion annually by exporting ready made garments, which represents about 16% of the economy and employs over 4 million workers.
Three more CNG filling stations in Patna, Naubatpur by August
The Gas Authority of India Limited (GAIL) will set up three more CNG (compressed natural gas) filling stations in Patna and Naubatpur by August this year to cater to the residents who wish to opt for cleaner, environment-friendly fuel to run their vehicles. The new CNG stations will come up at petrol pumps near Zero Mile (Bypass Road), Saguna Mor and Naubatpur. The CNG stations will be set up under the Pradhan Mantri Urja Ganga Yojana and will be connected to the eastern and north-eastern states with the national gas grid. The GAIL aims to set up 10 CNG stations in city by March 2020. Deputy general manager (project) of GAIL (Patna), Rajneesh Kumar Goel, told this newspaper on Sunday that of the three new CNG stations, two will be mother stations and one at Zero Mile will be daughter booster station. Mother stations are directly connected to the pipelines. CNG is made available in Patna through Haldia-Jagdishpur gas pipeline. CNG daughter station does not have the connectivity of natural gas pipeline. At these stations, CNG is transported through mobile cascades (bunch of cylinders) and then dispensed to vehicles through CNG dispensers. Rajneesh said the estimated cost of setting up one CNG station is around Rs2.5 crore to 3 crore. “With the three more by August-end, Patna will have five CNG stations. Five more CNG stations will be opened by the end of March 2020,” he said. Currently, two CNG stations are functioning at Rukanpura (mother station) and Choti Pahari (daughter booster station). According to GAIL sources, the daily consumption of CNG at Rukanpura station is between 2,000 and 2,500kg while it is 1,500kg at Choti Pahari. The two stations had been launched in February this year. Rajneesh said around 1,500 CNG vehicles were running in the city and most of them were autorickshaws. He said 1500 more autorickshaws have been provided with the licence to run on CNG. According to GAIL sources, they are looking for private parties to set up in collaboration more CNG stations in the city. “It is difficult to get land for the CNG stations. However, we got some proposals that are under consideration,” the sources said.
Dharmendra Pradhan justifies hike in taxes on fuel
Justifying hike in the taxes on fuel in the Union Budget 2019-20, Union minister Dharmendra Pradhan Saturday said there is a requirement of funds for the overall development of the country. “There is a requirement of funds for the overall development of the country. As there is a decline in the price of fuel in the international market, Indian economy should take advantage of the situation,” the Petroleum and Natural Gas minister told reporters while replying a question on increase of the price of petrol and diesel. Meanwhile, the price of both petrol and diesel has increased in Bhubaneswar Saturday, a day after Union Finance Minister Nirmala Sitharaman raised taxes on fuel. While per litre petrol price in the state capital was Rs 69.41 Friday, it increased by Rs 2.53 to Rs 71.94 Saturday. Similarly, the price of diesel has gone up by Rs 2.65 per litre to Rs 71.51. The price of diesel in Bhubaneswar Friday was Rs 68.86 per litre. The Union finance minister Friday announced raise of excise duty and road and infrastructure cess on petrol and diesel by Rs 2 per litre each. The diesel price in Odisha is the second-costliest in the country after Telangana. This is because Odisha levies the second highest VAT at the rate of 26 per cent on diesel while the rate of VAT in Telangana is 27 percent.