Japanese refineries close as the country's petroleum consumption falls

Japanese refiner ENEOS permanently closed a 120,000-barrel-per-day (b/d) refinery in western Japan in mid-October 2023, and another company, Idemitsu Kosan, plans to close a 120,000-b/d refinery in March 2024. These closures represent 7% of the country’s refinery capacity, said Hydrocarbonprocessing.

We forecast consumption of petroleum products in Japan will decline by 3% between 2023 and 2024 to 3.3 million b/d. Japan’s petroleum consumption declined by an average 2% per year through 2022 from its peak of 5.7 million b/d in 1996, largely because of demographic and economic changes. The oil intensity of Japan’s economy, measured as barrels of oil consumed per $1,000 of gross domestic product, has been declining.

Japan’s population peaked in 2009, and the country has seen some of the slowest economic growth among OECD countries since then. In addition, the share of Japan’s population aged 65 and older was 30% as of 2022, compared with 21% in the EU, 17% in the United States, and 14% in China, according to the World Bank.

Japan’s refineries were built mainly to serve its domestic fuel needs, and they have trouble competing in international markets. These refineries are smaller and less complex than newer refineries in Asia, including China, South Korea, and India. Complexity refers to a refinery’s secondary processing capacity, such as hydrocracking and coking, which upgrades low-value heavy fuel oil into valuable transportation fuels. More complex refineries can produce more high-value products from the crude oil they process.

Less complex refiners like those in Japan also process lighter and sweeter grades of crude oil, which are more expensive than heavier and more sour grades. Higher yields of lower-value products combined with using more expensive crude oils makes refiners in Japan less profitable and less competitive in world markets. Complex refinery margins in Asia can be 30%–50% higher than simple refinery margins.

In our recent International Energy Outlook, we project Japan’s petroleum consumption will continue to decline beyond 2024, suggesting that refiners in Japan will face additional competitive pressures.

We remind, PDVSA and U.S. oil major Chevron have requested a 15-year extension for two of their joint ventures from the country's oil ministry. PDVSA and Chevron have expanded operations since late last year under a special U.S. license, allowing Venezuela to resume crude exports to what was its largest market, the United States. But more investment is needed to reach production levels seen before oil sanctions were first imposed in 2019.

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A unit of Venezuela's state oil company PDVSA and U.S. oil major Chevron have requested a 15-year extension for two of their joint ventures from the country's oil ministry, as per Hydrocarbonprocessing.

PDVSA and Chevron have expanded operations since late last year under a special U.S. license, allowing Venezuela to resume crude exports to what was its largest market, the United States. But more investment is needed to reach production levels seen before oil sanctions were first imposed in 2019.

The largest of the two joint projects, Petroboscan, which is currently producing some 65,000 barrels per day (bpd) of heavy crude, will require $1.28 B for investment and $3.35 B for operational expenses in the 15-year period, Perez added during a conference.

The second project, Petroindependiente, will need $10.7 million for investment and some $205 MM for expenses.
Venezuela's National Assembly, dominated by the government's party after an election that did not have international observation, is expected to discuss the request before giving the go-ahead.

Perez also said Venezuela is producing below its 1.9 million-bpd OPEC quota, so it expects to remain exempted from any OPEC+ output cuts planned.

"Because of the sanctions, our output remains below the quota. We, of course, have a margin and want to continue ramping up (production)," Perez told Reuters on the sidelines of the conference.

Venezuela confirmed the government is working for reviving the idle offshore gas project Plataforma Deltana near to waters reclaimed by Guyana, but Perez did not provide details.

We remind, Chevron expects 2024 capital expenditures (capex) of $15.5bn-16.5bn for its subsidiaries and $3bn for its affiliates. Two-thirds of its planned $14bn upstream spending is allocated to the US, including $6.5bn to develop its US shale and tight portfolio. About 80% of its estimated $1.5bn downstream spending is allocated to the US. Both budgets include about $2bn in lower carbon capex.

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Aramco, one of the world’s leading integrated energy and chemicals companies, signed definitive agreements to acquire a 40% equity stake in Gas & Oil Pakistan Ltd, said Hydrocarbonprocessing.

GO, a diversified downstream fuels, lubricants and convenience stores operator, is one of the largest retail and storage companies in Pakistan. The transaction is subject to certain customary conditions, including regulatory approvals.

The planned acquisition is Aramco’s first entry into the Pakistani fuels retail market, advancing the Company’s strategy to strengthen its downstream value chain internationally.

This transaction would enable Aramco to secure additional outlets for its refined products and further provide new market opportunities for Valvoline-branded lubricants, following Aramco’s acquisition of the Valvoline Inc. global products business in February 2023.

Mohammed Y. Al Qahtani, Aramco Downstream President, said: “Our second planned retail acquisition this year aligns with Aramco’s downstream expansion strategy, with a clear path ahead for growing an integrated refining, marketing, lubricants, trading and chemicals portfolio worldwide. GO has a significant storage capacity, high-quality assets and growth potential, which will help launch the Aramco brand in Pakistan.”

We remind, ExxonMobil Catalysts and Licensing LLC has licensed its advanced fluid bed Methanol-to-Gasoline technology to Aramco for a demonstration scale unit to be located in NEOM’s Hydrogen Innovation and Development Center (HIDC).

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China's largest commercial underground oil reserve project, backed by China National Offshore Oil Corporation (CNOOC), has started construction in Ningbo, East China's Zhejiang Province, according to Globaltimes.

The Daxie commercial oil reserve, designed with a capacity of 3 million cubic meters, will receive a total investment of nearly 3 billion yuan ($420 million). It is scheduled to be completed by 2026, China Energy News reported.

After completion, it will provide a stable supply of crude oil to cities and provinces in East China and along the Yangtze River. The project holds significant importance for further promoting development of local economies, addressing any unexpected events in energy supply, and also enriching the digital transformation practices in the energy industry.

The project has been independently designed and constructed by CNOOC. It encompasses 3 million cubic meters of underground crude oil caverns, along with surface crude oil storage, transportation, and the supporting facilities. The underground crude oil caverns are able to operate maintenance-free for as long as 50 years.

Currently, China's commercial petroleum reserves primarily employ two methods: surface storage tanks and underground water-sealed caverns. In comparison to surface tanks, underground water-sealed caverns are generally constructed at a certain depth below the surface, ensuring their safety and reliability.

We remind, Nigeria's state-owned oil company NNPC Ltd said on Thursday it had renewed a production sharing contract with Total, China National Offshore Oil Corp and others, a major step to resolving disputes on a deepwater oil block in the Niger Delta.

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Sinopec Yangzi Petrochemical is planning to construct a polyolefin project including polyethylene (PE) and polypropylene (PP) in Nanjing, Jiangsu province, according to a company document.

Major plants will have a 350,000 tonne/year high density polyethylene (HDPE), a 300,000 tonne/year metallocene linear low-density polyethylene (MLLDPE) and a 400,000 tonne/year PP line.

The CNY6.7bn investment will be implemented in the company’s existing production site.

Ethylene and propylene feedstock will come from BASF-YPC in the same city.

We remind, Sinopec said it has signed an equity agreement with Kazakh state-owned oil and gas firm KazMunayGaz for a 30% stake in a planned polyethylene project in Kazakhstan. The project has a design capacity of 1.25 million metric tons per year and is located in western Kazakhstan’s Atryau region, the statement said.

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