SINGAPORE: Asian fuel exporters are hungrily eyeing Australia as the country’s shutdown of almost all its refineries creates a bright demand spot amid otherwise coronavirus crimped markets.
China appears to be best placed to take advantage of the opportunity, industry sources and analysts told Reuters, potentially leapfrogging the current top suppliers Singapore and South Korea in the scramble for a piece of the action.
Australia, already the region’s largest fuel importer, will likely boost imports by a third next year to 630,000 barrels per day (bpd), according to energy consultancy FGE.
“We expect most of the fuel imports to come from Chinese refiners, due to Chinese officials’ continued increase in refined products export quotas and the 600,000 bpd (barrels per day) expansion to Chinese refinery capacity in 2021,” said Julie Torgersrud, an analyst at consultancy Rystad Energy.
“New, high-complexity refinery capacity starting up in China puts increased pressure on competing refiners in the Asia Pacific region, who are suffering from lower margins and usually have older, less efficient operations.”
China’s refinery capacity is forecast to increase by 1.5 million bpd over the next two years, according to Rystad, compared with a net reduction of 1.2 million bpd across the Asia Pacific over the same period.
“We have exported diesel and gasoline to Australia before but it wasn’t as economical as selling into Southeast Asia,” a trader with a Chinese refiner told Reuters. “If demand rises with refinery closures and push up prices, then we’ll export more.”
There are only three oil refineries still operating in Australia after four shutdowns over the past decade, spurred by declining financial viability amid the growth of large-scale, export-oriented refineries throughout Asia and the Middle East.