Asian demand is fuelling China’s growth as a petrochemicals powerhouse
- 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
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.
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 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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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.
Demand for petrochemicals in Asia is strongly correlated with macroeconomic growth. As Asia’s massive, still-developing economies continue to recover, there is an increasing demand for plastic and other petrochemical products.
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According to the IEA, Chinese oil refining capacity is set to overtake that of the US next year. The region’s top consumers have been heavily investing in integrated refineries.
In China, oil refining capacity has nearly tripled since 2000, and its crude processing capacity is expected to reach 1 billion tonnes a year by 2025, according to China National Petroleum Corp’s Economics & Technology Research Institute.
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China was already an oil refining and petrochemical powerhouse before the pandemic, re-exporting petrochemicals to East and Southeast Asian countries lacking the infrastructure. As its economy continues to recovery, its clout in the industry will grow, not just through increasing domestic production capacity but also through international expansion.
Petrochemical projections across Asia look healthy and, given that the region’s post-pandemic recovery will happen faster than in the West, we can expect more investments in the industry in the coming year.
Dmitriy Frolovskiy is a political analyst and independent journalist. He is a consultant on policy and strategy, and has written about Russia’s foreign policy