PetroChina plans to close its largest refinery in 2025

State oil giant PetroChina plans to close its largest Chinese refinery in 2025 after years of considering moving processing to a smaller site, anonymous sources told Reuters on Monday.

PetroChina has been considering closing its Dalian petrochemical plant in central Dalian in northern China for years. The 410,000 barrels per day refinery accounts for about 3% of the Chinese refinery’s total output.

Dalian municipal authorities have been pushing for the relocation of the oil refinery from Dalian for many years.

The relocation and closure of the Dalian petrochemical plant is part of this plan following several fatal incidents over the past decade at the refinery, which is located in a densely populated area of ​​the city of Dalian.

As part of the shutdown and relocation plan, PetroChina has already blocked about half of its oil refining capacity, or 210,000 barrels per day, according to Reuters sources.

PetroChina’s parent company CNPC reached an agreement with Dalian authorities two years ago to build a smaller 200,000 bpd refinery at the new oil refinery and petrochemical plant on Changxing Island.

But PetroChina has not yet made a final investment decision on the new proposed facility, sources told Reuters.

The reported closure of the 410,000 bpd refinery comes at a time when Chinese refineries are facing excess capacity amid muted demand for road fuels, which appear to be gradually being replaced by LNG-powered electric cars and trucks.

China has seen weaker-than-expected demand for auto fuels this year, squeezing refining margins and leaving many refineries in debt.

Diesel demand in China has likely peaked as the use of LNG as a fuel in heavy-duty vehicles has risen sharply in recent months, analysts said.

The real estate crisis and rising use of LNG in road transport have weighed on diesel demand in China, weakening the outlook for oil demand growth in the world’s largest crude importer.

Tsvetana Paraskova for Oilprice.com

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