Zhejiang Petrochemical Corp, a major Chinese refiner backed by Saudi Aramco, has announced it is shutting a 200,000 barrels per day capacity unit ahead of maintenance work in response to the impact of the Middle East conflict on crude supplies, according to Reuters.
Separately, another Chinese refiner backed by Aramco, Fujian Refining and Petrochemical Co, or FREP, shut its 80,000-barrels-per-day unit - its smallest - for an unspecified period of time, two industry sources familiar with the matter said, according to Financialintelligence.
The US-Israeli war with Iran has disrupted almost all shipping through the Strait of Hormuz, a pipeline that provides 20% of the world's global oil supply. The reduction in supply has driven up international oil prices and is expected to prompt other refiners to cut output, industry sources said.
China, the world's biggest oil importer, gets about half of its crude from the Middle East.
ZPC's month-long overhaul in March will reduce output by 20%, a company representative told Reuters. Designed to process 800,000 barrels a day, the refinery is one of China's largest and operated above its rated capacity in February, sources said. „We previously planned the overhaul around March and April, and now we are anticipating it under the current circumstances,” the ZPC official said.
Fujian Refining and Petrochemical Co, a joint venture between the Fujian provincial government, national refining giant Sinopec, US conglomerate ExxonMobil and Aramco, last year purchased about 180,000 barrels per day of crude oil through the Strait of Hormuz, according to Kpler shipping data, accounting for nearly 95% of its seaborne crude oil imports.
Sinopec, the plant operator, and Aramco, which owns a 25% stake, did not immediately respond to requests for comment.
Some Chinese refiners that depend on long-term supplies from the Middle East may cut crude output by up to 20%, Energy Aspects analyst Sun Jianan wrote in a note on Monday. „Chinese refiners are likely to take precautionary measures and cut production as shipping from the Middle East is blocked,” Sun wrote.
The private sector-controlled ZPC has a 20-year supply agreement with state-owned Saudi Aramco for 480,000 barrels per day of crude oil and operates four 200,000 barrels per day units in Zhoushan in eastern China. Aramco has a 10% stake in Rongsheng Petrochemical, ZPC's largest shareholder.
Apart from Saudi oil, which supplies 60% of its designed capacity, ZPC is one of the largest buyers of Canadian oil from China. It also buys from Kuwait, Iraq and the United Arab Emirates, with the Middle East accounting for 751TP33T to 801TP33T of its total purchases, estimates Vortexa, a company specializing in oil tanker tracking.