China’s Excess Fuel Supply Forecast at 34 Million Tons in 2020

China will face an excess supply of 34 million metric tons of fuels by 2020, below previous estimates, as new refineries may be delayed or scrapped, according to the nation’s biggest oil and gas producer.

Diesel supply may exceed demand annually by 14 million tons, said Dai Jiaquan, a director at China National Petroleum Corp.’s Economic and Technology Research Institute. Gasoline will be oversupplied by 12 million tons and kerosene by 8 million tons, he said in a speech in Beijing today. An excess of 34 million tons is equivalent to 16 months worth of China’s exports including fuel oil, according to customs data.

“The fuel glut in 2020 is significantly lower than our previous forecast,” Dai said without providing details. “We believe refiners may have to delay or cancel expansion plans due to environmental reasons, especially those in northern China.”

China, the world’s second-largest oil consumer, faces an oversupply as refiners process crude at a faster rate than fuel demand is expanding. Its total refining capacity is projected to rise to 800 million tons a year by 2020, from about 614 million this year, according to CNPC’s research.

Planned refinery construction and upgrades may be delayed amid steps by the government to fight pollution, after air contamination in some cities exceeded hazardous levels several times this year. Chinese authorities aim to cut the concentration of PM2.5, the fine particles that pose the greatest health risks, by 25 percent in Beijing and Tianjin and the province of Hebei by 2017 from last year’s levels.

Delayed Start

PetroChina Co. will delay two new refineries originally scheduled to start operations next year, according to data from CNPC, the parent company, released today. The Kunming plant, with a crude-processing capacity of 10 million tons a year, will begin operations in 2016 while the Jieyang facility has been moved to 2017. A proposed 20 million-ton plant in Taizhou wasn’t shown in the data.

China Petroleum & Chemical Corp. (386), known as Sinopec, will expand its refineries in Jiujiang and Shijiazhuang in 2014 and in Yangzi in 2015, the CNPC data show. An upgrade of Cnooc Ltd. (883)’s Huizhou refinery is planned for after 2015.

A total of 210 million tons of new capacity in 23 refineries is scheduled to be added by the end of this decade, according to CNPC.

To contact Bloomberg News staff for this story: Sarah Chen in Beijing at schen514@bloomberg.net

To contact the editor responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net

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