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State oil giant PetroChina plans to shut its largest Chinese refinery in 2025 after years of considering moving the processing to a smaller site, anonymous sources told Reuters on Monday.
PetroChina has been thinking for years to shut its Dalian Petrochemical plant in downtown Dalian, north China. The 410,000-barrels per day refinery accounts for about 3% of the total Chinese refinery output.
The municipal authorities of Dalian have been pushing for years for the relocation of the refinery away from Dalian city.
The relocation and the closure of the Dalian Petrochemical facility are part of that plan after several deadly incidents over the past decade at the refinery, which is located in a densely-populated area in Dalian city.
As part of the closure and relocation plan, PetroChina has already shut in about half of the refinery’s crude processing capacity, or 210,000 bpd, according to Reuters’s sources.
PetroChina’s parent company CNPC, reached an agreement with the Dalian authorities two years ago to build a smaller, 200,000-bpd crude oil refinery at a new refining and petrochemicals site on Changxing island.
But PetroChina has not taken a final investment decision on the new proposed site yet, the sources told Reuters.
The reported closure of the 410,000-bpd refinery comes at a time when Chinese refiners are facing overcapacity amid tepid road fuel demand, which appears to be slowly being replaced by electric vehicles and LNG-fueled trucks.
China has seen weaker-than-expected road fuel demand this year, which has prompted a decline in refining margins, leaving many plants in debt.
Chinese diesel demand has likely peaked as the use of LNG as a fuel in heavy-duty vehicles has been surging in recent months, analysts say.
The property sector crisis and the rise of LNG use in trucking have weighed on China’s diesel demand, dampening the prospects of oil demand growth in the world’s top crude importer.
