Asian demand is fuelling China’s growth as a petrochemicals powerhouse

Name: Coronavirus: How badly is Covid-19 disrupting the oil industry in the US and beyond?
Uploaded: 2021-01-31T07:30:15.000Z
Duration: 5 min 59 s
Description: Coronavirus: How badly is Covid-19 disrupting the oil industry in the US and beyond?

Oil refineries in the US and Europe are flailing while China adds mega facilities, supported by demand for plastic and petrochemicals as Asia recovers more quickly from the pandemic

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Workers at the construction site of the Amur Gas Chemical Complex near Svobodnyy, Russia, on August 18, 2020. The project, built in partnership with China, is set to become the world’s largest polymer plant. Photo: AFP

Dmitriy Frolovskiy

Published: 3:30pm, 31 Jan 2021Updated: 3:40pm, 31 Jan 2021

Many oil refiners have announced project delays as crude oil prices fall amid a global economic downturn. Yet, while petrol-producing refineries in the US and Europe are struggling, China and other Asian countries, where local economies are recovering, are seeing a steady increase in refining capacity.

This is driven by demand for plastics and petrochemicals, which have recovered from an earlier dip in demand. However, the uncertain situation across oil markets and shifting global consumption will still have a long-term impact on the oil refining industry.

Last year, about 1.7 million barrels a day (bpd) of refining capacity was halted, with more than half of the stoppages happening in the US. This year, US polythene demand could shrink by 4 per cent, compared to a global dip of 0.8 per cent.

In November, Royal Dutch Shell pulled the plug on its refinery in Convent, Louisiana, confirming its plans to slash its refining capacities. About two-thirds of European refiners are not making enough money in fuel production to cover their costs. Europe needs to reduce its processing capacity by a further 1.7 million bpd in five years, but some experts already anticipate the loss of 2 million bpd this year alone.

In Asia, the situation seems radically different, as a new breed of integrated refineries sprout to convert oil into petrochemicals – the building blocks for everything from food packaging to car interiors – while producing fewer fuels such as petrol.

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Coronavirus: How badly is Covid-19 disrupting the oil industry in the US and beyond?

According to industry consultant Wood Mackenzie, more than half of the oil refining capacity that comes on stream by 2027 will be added in Asia, and around 70-80 per cent of this will be plastics-focused.