Contrary to some observers who focus intently on trade data as a proxy for demand, China’s total oil product demand rose by only 150 000 bpd in 2018. This is part of the reason why the global oil market is so weak as the year comes to an end. China’s oil demand will surprise again in 2019, but this time by rising by over 400 000 bpd, according to ESAI Energy’s latest China Watch. This rebound is comprised mainly of non-marketed naphtha at two new petrochemical integrated refineries, as well as LPG demand from a wave of PDH investment.
Naphtha produced and processed at the two new paraxylene (PX) projects—Hengli Petrochem and Zhejiang Petrochem—accounts for the bulk of the 180 000 bpd growth in naphtha demand. Given that the two plants’ controlling firms are downstream polyester manufacturers that have relied on PX imports for feedstock, projected naphtha demand could grow even more if the two projects reach full capacity next year. Meanwhile, new PDH units will drive up LPG demand growth to over 100 000 bpd in 2019. The development of PDH projects from now to the end of next year, with a combined capacity of 2.2 million t, does not seem to be affected much by the trade war between U.S. and China. Propane importers have managed to replace U.S. propane with product from the Middle East and elsewhere.
“The petrochemical sector will lift China’s oil demand growth, which should result in continued high crude and LPG imports,” comments ESAI Energy China Analyst Yao Wu. “In addition, although we see refinery-integrated PX units with a neutral impact on China’s naphtha balance, the replacement of PX imports should send ripples across Asian petrochemical sector and may affect the naphtha balances of top PX exporters, such as Japan, South Korea and Taiwan.”
Read the article online at: https://www.oilfieldtechnology.com/special-reports/28122018/esai-chinas-oil-demand-will-surprise-to-the-upside-in-2019/