The Chinese government has asked independent refineries in Shandong province to maintain their current run rates and not undertake any shutdowns or restarts in the first half of June to minimize the possibility of accidents when the country will be hosting the Shanghai Cooperation Organization Summit, market sources said late Wednesday.
The refiners were widely expected to lower run rates, similar to what the government had required the refining sector to do last September ahead of the G20 summit in Hangzhou.
Meanwhile, the disruption in crude and product flows from the Huangdao port was also expected to limit utilization rates. The port is close to the event venue and is expected to be shut over June 7-11.
The refiners will likely use their crude stocks to meet their feedstock requirements. Crude stocks at major ports in Shandong were at a record high of 5.19 million mt (38.04 million barrels) as of end May, up 4% from end April, according to local information provider JLC.
The SCO summit, hosted by Qingdao in eastern Shandong province over June 9-10, will be the most important international event hosted in China recently. Chinese President Xi Jinping is expected to meet Iranian President Hassan Rouhani and Russian President Vladimir Putin there. To ensure a smooth run of the summit, the provincial government has upgraded its security level and has been making more field checks to ensure that the safety standards are being met.
Accidents usually happen during shutdowns and restarts at refineries, so it is much safer to maintain the current situation, local refining sources said.
Run rate at Shandong's independent refineries rose slightly to around 62.6% May 30, according to JLC. This utilization rate will be likely maintained in the coming two weeks and would fall after the summit as several refineries will likely carry out their planned maintenance.
Dongying-based Haike Group had planned to shut its 2.3 million mt/year Ruilin Petrochemical refinery for maintenance in early June. "But we are required to keep on what we are doing. No change is allowed, neither shut for maintenance nor raise run rates in the coming weeks," a source with the refinery said.
Moreover, those that have been shut for maintenance are not allowed to resume operations until the summit is over.
Some refiners volunteered to shut their plants or lower utilization rates about a week ago to avoid any accident, sources said.
Rizhao-based Lanqiao Petrochemical shut its 3.5 million mt/year crude distillation unit about a week ago, mainly due to the upcoming summit in Qingdao, a company source said.
CRUDE IMPORTS VIA QINGDAO TO FALL
The event has affected discharge operations at Shandong-based Qingdao Port International, which manages China's largest crude oil importing ports by volume.
According to QPI's discharge plan, crude oil arrivals in Qingdao in June are likely to fall to 1.6 million mt from about 3.6 million mt in May.
QPI owns the Huangdao port, which is close to the event venue. The other port under QPI is Dongjiakou, which will not be affected by the summit.
It is unlikely to see any crude vessels entering the Huangdao port over June 7-11, a port source said.
The port closure will also affect product export plans of Sinopec's Qingdao refinery and Qingdao Petrochemical. Only state-owned refineries were allowed to export oil products so far this year.
The major Shandong ports are Huangdao, Dongjiakou, Longkou, Laizhou, Rizhao, Yantai and Dongying.
Independent refineries imported 35.56 million mt (2.17 million b/d) of crude over January-April, accounting for about 23.5% of China's total crude imports of 151.4 million mt in the same period, according to an S&P Global Platts survey.
