China's Strategic Shift: Targeting Teapot Refineries Amidst Renewable Energy Surge
Discover why China is refocusing its regulatory policies on small, independent 'teapot' refineries.
On Today’s Energy Shots:
Weekly Energy Industry News Recap
China's Strategic Shift: Targeting Teapot Refineries Amidst Renewable Energy Surge
Weekly Energy News Recap:
Oil Updates:
Brent futures climbed 2.9% to $90.48/bbl Friday, while WTI rose 2.8% to $85.54/bbl. For the week, Brent fell ~2%, and WTI settled ~4%.
Freeport LNG Approval
On Friday, the US Federal Energy Regulatory Commission (FERC) granted Freeport LNG approval to take the necessary steps to restart the facility’s Dock 2 service.
Freeport shut for eight months between June 2022 and February 2023 due to a fire and has since returned service to three liquefaction trains, two LNG storage tanks, and one LNG dock (Dock 1).
Why China is Targeting Teapots (Again)
This week, China’s National Development and Reform Commission (NDRC) announced new refining targets as the country shifts from building refinery capacity to optimizing refinery capacity.
The NRDC’s updated regulation supports a 2021 cap on the country’s crude refining capacity at 20 million barrels per day by 2025, adding that refineries over 200,000 bpd will account for ~55% of capacity in the same year.
The Commission plans to incentivize upgrades to existing facilities, limit new refinery capacity, and close outdated or small refineries.
Officially, China is implementing the policy to curb greenhouse gas emissions.
Indeed, that is a side-effect of improving utilization rates – China’s refinery utilization of 73% in 2022 pales compared to the US’ 91%.
And which refineries are most responsible for low utilization? Small independent refineries, a.k.a “teapots.”
But emissions are only part of the picture.
This week’s policy update follows decades of conflict between the central government’s National Oil Companies (NOCs) and small independent teapot refineries – a conflict that ultimately leads to accelerated growth in refining frontiers.
Before highlighting where teapots are shifting their focus, here’s a brief history of the central government’s relationship with independent refineries.
Keep reading with a 7-day free trial
Subscribe to Mobius Risk Group to keep reading this post and get 7 days of free access to the full post archives.