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POLL-China refiners add capacity, eye small boost in crude runs

Judy Hua and Chen Aizhu
Tuesday, 11 Feb 2014 | 2:20 AM ET

* Overcapacity fears delay projects slated for startup this year

* Refiners plan 1.4 pct crude run increase for 1/3 of capacity

* Low crude throughput plans point to worries of oversupply

BEIJING, Feb 11 (Reuters) - China aims to add more than twice the oil processing capacity in 2014 than it did last year, even as top state refiners plan to raise crude runs only 1.4 percent at some of their largest plants due to worries about slow fuel demand growth. The world's second-largest oil consumer aims to add nearly 600,000 barrels in daily refining capacity in 2014, and was slated to bring on more before PetroChina delayed two startups and an expansion as 2013 oil demand growth dropped to a 22-year low. China's biggest state refiners plan to raise crude throughput by just 45,350 barrels per day (bpd), or 1.4 percent, this year over last year at 13 plants along the nation's eastern seaboard, a Reuters poll on refinery operations showed. If that same rate of increase in crude runs holds across all of China's refineries, it would be the smallest rise in refinery throughput since at least 2003, according to BP's Statistical Review of World Energy (http://r.reuters.com/syj76v). Given overcapacity in China's refining sector stretching back several years, that suggests the near-term future for the nation's refiners includes low run rates, stressed margins and continued pressure to hold off on expanding capacity. "The new capacity this year could make oversupply a bit more serious than last year. Refinery run rates fell last year and could fall further this year," said a Beijing-based oil analyst. China accounted for around a quarter of the world's increase in oil use last year, according to the International Energy Agency (IEA), and its slower growth in fuel demand capped prices that may have risen further on the plunge in exports from Iran and prolonged outages in Libya and disruptions in Sudan. The refineries in the Reuters poll - operated by Sinopec Corp , Asia's largest refiner, PetroChina and China National Offshore Oil Corp (CNOOC), long with foreign partners in some cases - have a combined capacity of more than 3.8 million bpd, about one third of China's total. The run rates at the plants represent a utilisation rate of around 84 percent, with a number of refineries, such as PetroChina's Dalian and Lanzhou and CNOOC's Huizhou refineries, planning major maintenance this year. China's overall refinery run rates have held around 80 percent for the last dozen years, according to Reuters data and BP's Review of World Energy. Despite refinery overcapacity that has held around 2 million bpd since 2008, Chinese oil majors will still be adding a total of 590,000 bpd - an effective 420,000 bpd when averaged across the full year - this year, the poll showed. Among those starting up this year, state-run Sinochem Corp's first fully owned refinery, the 240,000 barrels-per-day Quanzhou plant, began test runs in January. PetroChina's $6 billion refinery and petrochemical complex in Sichuan province in the southwest, with 200,000 bpd in capacity, will be ready for trial production in weeks, company officials have said. Expansion of Sinopec's Yangzi and Shijiazhuang refineries is also coming at mid-year, even as some Chinese and international majors are delaying or abandoning projects at least in part due to concerns over an oversupplied market. Besides the refinery startups and capacity expansion that PetroChina has said it is putting off for up to three years, Royal Dutch Shell and its partners have stalled a 400,000 bpd refinery project in east China. BP Plc is also dropping plans to invest in a 200,000-bpd refinery project in southern China on worries about slow growth in fuel consumption.

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CRUDE OIL THROUGHPUT (in barrels per day)

OWNERSHIP 2014 RUNS 2013 RUNS CAPACITY --------------------------------------------------------------- Zhenhai Sinopec 440,000 440,000 460,000 Jinling Sinopec 350,000 342,650 430,000 Dalian PetroChina 290,000 320,000 410,000 Maoming Sinopec 366,000 326,000 400,000 Lanzhou PetroChina 195,000 210,000 280,000 Fujian Sinopec/ 240,000 194,000 280,000

Aramco/ Exxon Mobil

Guangzhou Sinopec 250,000 234,000 270,000 Gaoqiao Sinopec 200,000 200,000 260,000 Huizhou CNOOC 210,000 240,000 240,000 Fushun PetroChina 166,000 166,000 230,000 Qilu Sinopec 226,000 210,000 220,000 WEPEC PetroChina/ 160,000 145,000 200,000

Total/ Sinochem

Jinzhou PetroChina 110,000 130,000 150,000 ------------------------------------------------------------ Total 3,203,000 3,157,650 3,830,000

NEW REFINING CAPACITY IN 2014 (in bpd)

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Quanzhou Sinochem 240,000 Jan 2014 Sichuan PetroChina 200,000 Q1 2014 Yangzi Sinopec 90,000 mid 2014 Shijiazhuang Sinopec 60,000 Aug 2014 ------------------------------------------------------------- Total 590,000 bpd Effective 420,000 bpd

(Additional reporting by the BEIJING newsroom; Editing by Manash Goswami and Tom Hogue)

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