China Delays Major Refinery Projects Amid Mideast Crisis
Two major Chinese refinery projects totaling 500,000 barrels per day have been postponed due to supply disruptions from Tehran's closure of the Strait of Hormuz and rising Russian crude prices.
The delayed facilities include a 300,000 bpd refinery in Panjin, located in northeastern China, and a 200,000 bpd facility in the southern city of Dalian, Breitbart News reports. Both projects were designed with significant Middle Eastern crude oil imports in mind.
The Panjin facility represents a joint venture between state-owned Panjin Xincheng Industrial Group, state defense contractor Norinco Group, and Saudi Arabia’s state oil giant Aramco. The three entities established Huajin Aramco Petrochemical Company, known as HAPCO, to oversee the refinery operations.
Originally scheduled to begin operations by the end of June, the Panjin refinery now faces delays until September at the earliest, depending on when normal Middle Eastern oil shipments resume.
The Dalian project, managed by Chinese state oil firm PetroChina, was initially designed to process inexpensive Russian crude oil. While the Hormuz crisis has not directly severed oil flows to this facility, it has driven up demand for Russian crude and pushed prices higher, rendering the new refinery economically unnecessary. With Chinese refineries currently operating at approximately 69 percent capacity, no immediate need exists for additional facilities. The Dalian refinery has consequently been postponed without a specific timeline.
China’s Role in Global Energy Markets
China has functioned as a critical stabilizing force in global energy markets during the crisis, reducing its oil imports from 11.7 million bpd to 9 million bpd since the Strait of Hormuz closure began in early March. This reduction has helped mitigate the supply shock affecting other nations.
Industry analysts indicate that China accounts for 74 percent of the decline in global oil imports since March.
The decrease in Chinese demand has played a significant role in preventing oil prices from skyrocketing beyond current levels. Despite a 14 percent drop in global oil supply, prices have risen only 30 percent. This stands in sharp contrast to the 1973 OPEC oil embargo, when a mere seven percent supply reduction triggered a 134 percent price explosion.
With information from Breitbart News
