Communicator

Photo: Petrochina Dalian Refinery

7 Nov 2024

PetroChina, one of China’s major oil companies, plans to close its Dalian refinery in northeastern China by mid-2025, marking the first complete shutdown of a state-operated refinery in the country. The Dalian refinery, which dates back to 1993, has a crude processing capacity of 410,000 barrels per day (bpd) and a Nelson complexity index of approximately 6.1, reflecting its ability to handle various crude oil types and produce a range of refined products. It contributes around 3% of China’s total refining capacity and has been a significant part of PetroChina’s refinery network for decades.

The refinery plays a vital role in supplying refined products to the Chinese domestic market, including diesel, gasoline, and jet fuel. While its primary focus has been on meeting local demand, the Dalian refinery has also engaged in exports, supplying refined products to other regions in Asia, particularly  Japan and  South Korea. The facility primarily processes  Russian ESPO (East Siberia Pacific Ocean) crude, which is delivered via pipelines from Siberian fields through China’s northeastern region.

PetroChina’s decision to close the Dalian refinery stems from multiple factors, including overcapacity, weakened domestic fuel demand due to slower economic growth, and an increase in vehicle electrification across China. Environmental concerns have also played a role, as the refinery has been situated in a densely populated area, with incidents such as an oil spill in 2010 and fires in 2013 and 2017 highlighting the risks of operating a large facility in close proximity to urban areas.

The phased shutdown began in October 2023, with PetroChina closing a 210,000-bpd unit within the refinery. The remaining capacity is scheduled to be taken offline by 2025. Once the shutdown is complete, PetroChina intends to redirect crude oil supply to other refineries in northern China, including the WEPEC (West Pacific Petrochemical Company) refinery in Dalian and another facility in nearby Jinzhou.

In a bid to offset the reduction in refining capacity, PetroChina’s parent company, the China National Petroleum Corporation (CNPC), announced plans to develop a new, smaller refinery and chemical complex on Changxing Island, approximately two hours from Dalian. This project, valued at CNY70 billion (USD 9.6 billion), is expected to process around 200,000 bpd of crude oil and produce 1.2 million tonnes of ethylene annually. However, the new complex is still in the pre-feasibility stage, and a final investment decision has yet to be made.

The closure of the Dalian refinery underscores PetroChina’s efforts to modernise its infrastructure, reduce environmental risks, and adapt to changing energy demands. With China moving towards greener energy solutions and reduced reliance on fossil fuels, PetroChina’s shift reflects the country’s broader strategic push towards sustainability.

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