China faces refinery consolidation challenge

A new mega-refinery is meant to concentrate rather than expand capacity. But it may not work out that way, and may have other knock-on effects

China has committed to a new 400,000bl/d mega-refinery in Shandong to be built by 2024. And it plans to shut down an even greater capacity of smaller, less-complicated independent facilities, the so-called ‘teapot’ refineries to make room for the new plant without adding to the country’s refined products glut. But it remains to be seen if China can pull off this consolidation, or if at least some of the teapots marked for closure will cling on and lead to a capacity increase. On the assumption that clean air is a major driver behind the decision, Steve Hanke, professor of applied economics at John Hopkins University in Baltimore, is optimistic. The move will, in his view, be “transformationa