Royal Dutch Shell PLC shut down an oil refinery in Louisiana this month, bloomberg News reported On Nov. 22. Unlike many other refineries that have ceased operations in recent years, the refinery is not behind The Times. By U.S. standards, it is large and technologically advanced, capable of converting various crude sources into high-value fuels. But Shell wants to slash refining capacity but can't find a buyer.
While 700 workers at the Louisiana refinery found themselves out of work, peers across the Pacific were starting new facilities at Rongsheng's Zhejiang plant, reports said. This is just one of at least four projects under construction in China. The four projects have a combined crude oil processing capacity of 1.2m barrels a day, equivalent to the refining capacity of the entire UK.
The crisis at the Louisiana refinery has accelerated the upheaval in the global refining industry, the report said. Demand for plastics and fuels is growing in China and other Asian countries. Refiners in the U.S. and Europe, by contrast, are facing a deeper economic crisis, as a shift away from fossil fuels and toward cleaner energy sources darkens the long-term outlook for oil demand.
The United States has been the world's largest refiner since the oil age began in the mid-19th century. But the International Energy Agency predicts that China could displace the United States as soon as next year. When the Louisiana refinery opened in 1967, the US had 35 times China's refining capacity.
The rise of China's refining industry and the construction of large new refineries in India, the Middle East and elsewhere are having an impact on the global energy system, the report said. Oil exporters are selling more crude to Asia, while selling less to old customers in North America, Europe and elsewhere. And as capacity increases, Chinese refineries are becoming an increasingly powerful force in the international market for gasoline, diesel and other fuels.
"In the next few years, China is going to add another million barrels a day of capacity," said Steve Sawyer, refining analyst at Fay Global Energy Consulting. I'm afraid China's refining capacity could overtake the US in the next two years."
China's refining capacity is almost three times what it was at the start of the decade as it struggles to meet rapidly growing demand for gasoline and diesel, the report said.