By Li Shousheng, President of CPCIF

Achievements of the petroleum and chemical industry from 2016 to 2020

During the 13th Five-Year Plan period (2016-2020), China’s petroleum and chemical industry made new advances in structural adjustment, technical innovation, green development, international cooperation, etc., despite difficulties like sluggish growth of world economy, intensifying international trade conflicts and the coronavirus pandemic.

1. Industry development

In the past five years, added value of the domestic petroleum and chemical industry was up 4.51% annually, operating revenue up 4.33%, total profits up 8.11% and foreign trade value up 3.66%. Output of crude oil stayed at around 190 million tons. Natural gas output soared 48.54% from 2015 to more than 180 billion cubic meters in 2020, when oil and gas equivalent at Changqing Oilfield hit a new record high in China, exceeding 60 million tons. Capacity of crude oil distillation reached 873 million t/a, ranking second in the world. In addition, output of major commodities – e.g. ethylene, methanol, caustic soda, sodium carbonate, synthetic resins, fertilizers, pesticides and tires – remained among the world’s highest. Self-sufficiency rates of PX, synthetic rubber and potash fertilizers grew continually.

2. Structural adjustment

More outdated production facilities were shut down. More specifically, refineries eliminated outdated capacity of around 160 million t/a from 2016 to 2020, urea firms 17.87 million t/a, caustic soda firms 3.27 million t/a, PVC firms 2.69 million t/a, calcium carbide firms nine million t/a and sulfuric acid firms 21.6 million t/a. In the field of crude oil processing, rate of capacity utilization was up from 65.5% in 2015 to 77.2% in 2020, and oil products were upgraded from national IV standard to national VI standard.

Proportion of high-concentration fertilizers increased, and low-toxicity pesticides dominated the market. Output value of new chemical materials exceeded RMB650 billion in 2020, up 150% from 2015. Output of polyurethane and its raw materials could basically meet domestic demand, and self-sufficiency rates of TPE and functional membrane materials approached to 70%. Market shares of UHMWPE, waterborne polyurethane, aliphatic isocyanates and fluorinated silicone rubber all soared.

A large number of chemical industrial parks were established in Yangtze River Delta, Pearl River Delta and Bohai Bay Area.

3. Technical innovation

While making promising advances in technologies to explore Fuling large marine shale gas field, conglomerate oil reservoir in sag regions, and deep large condensate gas field at Bohai Bay Basin, domestic researchers resolved key technical problems in production of advanced polymer materials, high-performance resins, special synthetic rubber, high-performance fibers, functional membrane materials and electronic chemicals. Coal to oil/olefin and S-MTO technologies boosted diversified utilization of raw materials and clean utilization of energies. Further, enterprises increased localization rates of parts and components of major equipment such as refining equipment (more than 90%), modern coal chemical equipment (more than 90%), million-ton-grade ethylene and downstream equipment (more than 85%) and rubber equipment (around 95%).

4. Green development

Domestic petroleum and chemical enterprises decreased average comprehensive energy consumption, and emissions of waste gas, waste water and industrial residue. The discharge of major pollutants was significantly reduced.

Comprehensive utilization rate of general solid wastes reached 65%, that of hazardous wastes grew to 55%, and that of acetylene sludge approached to 100%. Further, enterprises made progresses in utilizing bulk industrial solid wastes, disposing salt-containing wastewater and waste salt with caustic soda units, and producing ammonium sulfate via multistage purification of waste acid.

From 2016 to 2020, 1 749 standards were formulated or revised, involving key areas such as new chemical materials, new agrochemical products, chemical safety, energy conservation and emission reduction. The idea of responsible care got more attention. By the end of 2020, eight central companies, 13 associations and branches, 64 chemical industrial parks and 616 enterprises and public institutions signed letter of commitment for responsible care; six chemical industrial parks and two professional and local associations spontaneously set up responsible care work groups. Hence improvement in energy conservation, environmental protection and safety.

5. International cooperation

The number of oil-gas exploration projects that domestic enterprises constructed in more than 50 countries exceeded 200, five overseas oil-gas cooperation zones (Central Asia-Russia, Middle East, Africa, America, Asia Pacific) were established, and a batch of overseas rubber planting, natural rubber processing, tire manufacturing integration bases were founded. In addition, domestic petroleum and chemical enterprises have established stable and friendly communication channels with 17 international organizations and industry associations from over 70 countries. Multinational corporations actively expanded businesses in china, with BASF and ExxonMobil both spending US$10 billion on projects in Guangdong.

Tasks facing petroleum and chemical firms to achieve high-quality development during 2021-2025

1. Energy transformation

Burgeoning new energy technologies will greatly decrease demand for traditional energies, petroleum and coal for example. Oil demand will show a downward trend in the next 30 years, according to bp World Energy Outlook.

Coal consumption is forecast by some economists to gradually decline after reaching a peak in 2025. Renewable energy technologies seeing new breakthroughs will rapidly cut costs of hydropower, wind power and solar energy. Hydrogen energy enterprises are making a big stride in technologies, costs and system supporting capability. The world’s energy structure will change more rapidly, requiring petroleum and chemical enterprises, especially industry giants, to take appropriate measures as soon as possible.

Sinopec – in the vanguard of enterprises developing clean energies – actively makes plans to propel businesses of hydrogen energy, geothermal energy, PV, etc. CNPC tries to become a world leading integrated energy company via upgrading oil and gas businesses and developing new energies and new materials. CNOOC sets forth targets of green and low-carbon transformation for the next five years.

Local governments of more than 20 provinces/50 cities have issued plans and incentive policies to develop hydrogen industry, which enters a critical period, when competition between traditional energies and renewable energies is becoming fiercer. Traditional energy enterprises need to realize that the Stone Age did not end because of lack of stone, but because of smelting technology. Similarly, the end of the Age of Oil will not be due to running out of oil, but due to the emergence of renewable energies. Therefore, on the premise of ensuring national energy demand and energy security, industry players should actively conduct R&D on new energy technologies – hydrogen energy related technologies in particular – and replace traditional energies with new energies in an orderly way.

2. Structural restructuring of chemical industry

To solve structural contradictions, fundamental constraints for the chemical industry to realize high-quality development, chemical firms should: 1) improve self-sufficiency rates of new chemical materials and high-end fine chemicals such as green pesticides, functional coatings, catalysts and electronic chemicals (domestic output of new chemical materials reached 27 million tons in 2020, far lower than consumption of 38 million tons); 2) strengthen existing advantages – e.g. striving for low-carbon emissions of high-carbon raw materials; 3) upgrade traditional industries (e.g. nitrogen fertilizers, chlor-alkali, sodium carbonate and rubber) to search for new market demand.

In the future five years, high-end manufacturing and strategic emerging industries will be greatly propelled to help China take the leading position in the areas of new chemical materials, high-end fine chemicals, coal chemicals, energy conservation, environmental protection, biochemical and bioscience.

3. Low-carbon and green development

As well as aiming to halt the rise of its carbon emissions by 2030, China will strive for carbon neutrality by 2060. To reach these goals, domestic enterprises should fully realize that there are many difficulties as China is the source of around 30% of global carbon emissions. Production of oil, natural gas and coal chemicals, and application of oil products and natural gas all generate high carbon emissions. Chemical enterprises have technical advantage to reduce pollution, and should play a leading role in decreasing carbon emissions. However, the process should be rational, considering both current situation of emissions and development of enterprises. Green technologies are vital for reduction of carbon emissions, and for separation, capture, transportation and storage of CO2, especially during production of oil, gas and coal chemicals.

Compared with reducing carbon emissions, achieving carbon neutrality will be more difficult and has to rely on chemical enterprises – main forces of seeking physical applications of CO2 in the areas of food, medical treatment and solvent extraction, and of expanding chemical applications in the fields of small molecule compounds (e.g. synthetic urea, methanol, salicylic acid and inorganic salt), high polymer materials and epoxy compounds.

Plastic pollution control and plastic recycling are also important for green transformation. In addition, petroleum and chemical enterprises will reduce energy consumption continually, accelerate construction of green manufacturing system, promote circular economy, etc.

4. Stronger leading firms

Leading enterprises make development plans according to new challenges, new tasks and new requirements during the 14th Five-Year Plan period, when a group of leading enterprises with international competitiveness and world-class chemical industrial parks will be cultivated.

5. Double circulation – domestic and international markets

Domestic market is boosted by many factors: 1) rural revitalization scheme stimulating agricultural/rural market potential; 2) development of metropolitan areas and urban agglomerations such as Beijing-Tianjin-Hebei, Shenzhen-Guangzhou-Macao, Yangtze River Delta and Chengdu-Chongqing; 3) a large number of key infrastructure projects, key technical projects and large structure upgrade projects all driving market demand; 4) green and low-carbon development generating new economic growth point. The structure of double circulation links domestic and international markets for mutual benefit and win-win outcome.

Strategic measures to be taken by petroleum and chemical firms to realize transformation and reconstruction during 2021-2025

Strategic measures set in the 14th five-year development planning guide for the domestic petroleum and chemical industry to transform and reconstruct mainly involve six aspects – technical innovation, industrial and supply chain, low-carbon and green development, double circulation structure, innovative talents (foundation for achieving high-quality development), and fine traditions (e.g. facing difficulties with courage and dedication).

For the domestic petroleum and chemical industry, technical innovation capability lags behind overall – especially in high-end areas, and therefore needs to be improved, mainly via strengthening leading role of innovation strategies, enhancing innovation forces (from enterprises, universities, scientific research institutions, new innovation platforms/alliances, etc.) and optimizing innovation systems by means of innovation funds, science and technology awards, etc. In the 14th Five-Year Plan period, domestic petroleum and chemical enterprises will greatly develop new energies, new chemical materials (e.g. high-end polyolefin resins, special engineering plastics, and advanced composites), functional materials (e.g. membrane/biomedical materials), specialty chemicals (e.g. high-end electronic chemicals), etc. Improvement in innovation ability will help them enhance capabilities to supply high-end products.

More competitive industrial chain is important for achieving high-quality development. However, measures should be different, given a wide range of products of the petroleum and chemical industry. For example, to improve oil and natural gas industrial chains, enterprises are required to expand upstream oil-gas resources continually, promote innovation of exploration and refining technologies, and build professional teams responsible for market-oriented oil and gas pipeline networks. To improve fertilizer and pesticide industry chains, producers are encouraged to strive for targets of usage reduction and efficiency improvement relying on technical innovation.

Low-carbon and green development is closely related to transformation and upgrading of the domestic petroleum and chemical industry, and detailed tasks mainly involve: 1) reducing energy and carbon emissions (by taking measures such as optimizing industrial and energy structures, developing new energies and researching new technologies); 2) making technical breakthroughs to help halt the rise of carbon emissions and achieve carbon neutrality; 3) propelling plastic recycling; 4) conducting environmental governance.

With the domestic market as a foundation, the double circulation structure links the domestic and international markets for win-win results. More supportive polices will be rolled out to encourage transnational corporations to cooperate with domestic enterprises in the fields of technical innovation, talent cultivation, environmental protection, etc. In addition, China will expand the international market, and kick off more high-end projects overseas.