¿2024, ¿ cómo rompe la industria petroquímica?

Recently, the China Petroleum and Chemical Industry Federation released the economic performance of China's petroleum and chemical industry in 2023. In 2023, the petrochemical industry's economic performance rebounded from a low level, showing strong resilience, providing a solid guarantee for national energy security and economic and social development. 2024 is a crucial year for the implementation of the 14th Five Year Plan. The international environment is becoming more severe and complex, and the uncertainty of the world economy is further increasing. In order to achieve high-quality development of China's petrochemical industry, which key areas will we focus on? What kind of goals should be established? Fu Xiangsheng, Vice President of the China Petroleum and Chemical Industry Federation, answered the above questions in a report titled "Enhancing Confidence, Accelerating Transformation, and Striving to Create a Stable and Progressive New Situation". This version provides a special interpretation of the report, please stay tuned.

This version of the text was organized by our reporter Lei Lei, and the images were provided by He Wen

Economic operation of the petroleum and chemical industry in 2023

According to data from the National Bureau of Statistics, China's petroleum and chemical industry achieved a revenue of 15.95 trillion yuan in 2023, a decrease of 1.1% compared to the previous year; The total profit was 873.36 billion yuan, a decrease of 20.7% compared to the previous year; The total import and export volume was 952.27 billion US dollars, a decrease of 9% from the previous year.

Situation of the three major sectors

·Oil and gas sector

Realized operating revenue of 1.44 trillion yuan, a decrease of 3.9% from the previous year; Realized a profit of 301.03 billion yuan, a decrease of 15.5% from the previous year.Realized operating revenue of 1.44 trillion yuan, a decrease of 3.9% from the previous year; Realized a profit of 301.03 billion yuan, a decrease of 15.5% from the previous year.

·Refining sector

Realized a revenue of 4.96 trillion yuan, an increase of 2.1% compared to the previous year; Realized a profit of 65.6 billion yuan, an increase of 192.3% compared to the previous year.

·Chemical sector

Realized a revenue of 9.27 trillion yuan, a decrease of 2.7% from the previous year; Realized a profit of 486.26 billion yuan, a decrease of 31.2% from the previous year.

Presenting characteristics

◎Significant increase in production of key products

·Oil and gas production maintains stable growth

In 2023, the total domestic crude oil and natural gas production was 416 million tons (oil equivalent), an increase of 3.9% compared to the previous year.

·Rapid recovery of crude oil processing volume

In 2023, the cumulative processing of crude oil in China reached 735 million tons, an increase of 9.3% compared to the previous year.

·Rapid growth in refined oil production

In 2023, the production of refined oil (gasoline, kerosene, diesel) reached 428 million tons, an increase of 16.5% compared to the previous year.

·The total production growth of major chemicals has shifted from negative to positive

In 2023, the total production of major chemicals in China was about 720 million tons, an increase of about 6% compared to the previous year.

·The production of key chemicals has recovered and grown rapidly

In 2023, China's ethylene production reached 31.899 million tons, an increase of 6% compared to the previous year; The production of synthetic resin reached 119 million tons, an increase of 6.3% compared to the previous year; The production of synthetic rubber reached 8.233 million tons, an increase of 13% compared to the previous year.

◎The growth rate of apparent consumption has changed from negative to positive

In 2023, the total apparent consumption of crude oil and natural gas in China was 1.123 billion tons (oil equivalent), an increase of 8.2% compared to the previous year; The apparent consumption of major chemicals increased by 6.2% compared to the previous year; The total apparent consumption of fertilizers (net) was 53.52 million tons, an increase of 4.9% compared to the previous year.

◎Overall decline in industry benefits

In 2023, enterprises above designated size in China's petroleum and chemical industry achieved a cumulative operating income of 15.95 trillion yuan, a decrease of 1.1% compared to the previous year; The total profit achieved was 873.36 billion yuan, a decrease of 20.7% from the previous year.

◎The import and export volume of foreign trade has decreased, while the quantity has maintained growth

In 2023, the total import and export volume of China's petroleum and chemical industry was 952.27 billion US dollars, a decrease of 9% from the previous year, but the overall import and export volume continued to maintain a growth trend.

Challenges faced by the high-quality operation of the petrochemical industry in 2024

There is still room for improvement in efficiency. China's position as a major petrochemical country is increasingly consolidating, but compared to developed countries and multinational corporations, weak core competitiveness and significant efficiency gaps have always been pain points. In 2023, the profit margin of the entire industry's operating revenue was 5.47%, which is not only horizontally lower than developed countries and regions such as the United States, Europe, and Japan, but also vertically lower than its own historical good years. It is even lower than the first two years of the 14th Five Year Plan (6.8% in 2022 and 8% in 2021). From business data closely related to efficiency, the operating cost per 100 yuan in 2023 increased by 0.7 yuan compared to 2022, and the industry's loss area expanded by 2.8 percentage points compared to 2022. The management expenses of the oil and gas and chemical sectors have increased significantly, while the financial expenses of the refining and chemical sectors have increased significantly. This all proves that there is great potential and space to reduce costs and improve efficiency.

The severity of overcapacity must be taken seriously. In order to alleviate the contradiction between "low-end surplus and high-end shortage", the petrochemical industry has continuously strengthened innovation and accelerated development since the 13th Five Year Plan, and the contradiction between high-end products and high-performance materials shortage has been alleviated. However, the situation of basic products and general materials surplus has not improved, and is becoming increasingly serious. Especially for a long time, the traditional thinking and development concept of "scale based heroes", "excessive emphasis on quantity increase, and neglect of quality improvement", combined with the constraints of weak original innovation ability and technological bottlenecks, have led to a large amount of investment mainly focused on expanding scale and quantity increase, while the proportion of capital invested in structural optimization, high-end and differentiation is relatively small. If the current situation of "low-end surplus and high-end shortage" does not change, China's petrochemical industry can only hover in the middle and low-end of the industrial chain for a long time, can only be entangled in the vortex of overcapacity for a long time, and can only look at the lighthouse of "petrochemical power" from the platform of a petrochemical power.

The bottleneck of resource constraints is once again highlighted. It is difficult to break through the resource bottleneck of China's petrochemical industry, which is characterized by a shortage of coal, oil, and gas. Overall, in addition to relatively abundant salt ore resources, China not only lacks oil and gas, but also lacks phosphate and potassium ore resources, as well as lithium and boron ore resources required for the development of the chemical industry, fluorite resources for fluorine chemical industry, barite and celestite resources for barium strontium salts, etc. The most typical example is the main energy and raw materials for the current development of the petrochemical industry - oil and natural gas. In 2023, the import volume of crude oil was 564 million tons, and the processing volume was 735 million tons, both reaching historical highs. The import volume of crude oil has increased again after two consecutive years of decline, while the processing volume has returned to positive growth after a 3.4% decline in 2022. In 2023, China's external dependence on crude oil increased from 71.2% in 2022 to 72.9%. In addition, the light hydrocarbon resources used for ethane cracking to produce ethylene and propane dehydrogenation to produce propylene in China mainly rely on imports and are greatly affected by supply chain fluctuations, which greatly reduces their competitiveness compared to North America and the Gulf region.

Modern coal chemical industry is facing new bottlenecks. Modern coal chemical industry is a unique advantage of China and one of the few world leading fields. Since the national layout of the "Four Modern Coal Chemical Industry Upgrade Demonstration Bases", significant innovations and breakthroughs have been made in coal to oil (direct and indirect methods), coal to gas, coal to olefins, coal to ethylene glycol, and coal to aromatics, accumulating important experience in engineering and industrialization. In addition, in-depth research and exploration have been carried out in the complementary development of coal chemical and petrochemical industries, as well as the coupling development of coal chemical and new energy, providing technical reserves and strategic guarantees for national energy security. However, modern coal chemical industry has been struggling since its upgrade and demonstration. In the past few years, coal to olefins has been the most profitable and successful demonstration industry chain, while coal to oil has always hoped for policy support for exemption from consumption tax. Coal to gas and coal to ethylene glycol have been in a loss making state, especially the operating rate of coal to ethylene glycol has always been below 50%. In 2022, with high global natural gas prices and coal to gas companies solving the long-standing problem of pipeline access, coal to gas companies have ushered in a rare good year. But in 2023, the modern coal chemical industry encountered new difficulties, with a significant decline in efficiency. According to the prediction of the Coal Chemical Industry Special Committee, the profit from coal to oil will decrease by 52.7% compared to the previous year, the profit from coal to gas will decrease by 39%, the profit from coal to olefins will decrease by 82.4%, and the profit from coal to ethylene glycol will continue to lose 1.87 billion yuan in 2023 after consecutive years of losses; The performance of coal to olefins in previous years has decreased, and the revenue in 2023 decreased by 7.8% compared to the previous year. The new challenges faced by modern coal chemical industry include high prices of raw coal and electricity, as well as issues of product structure similarity, lack of differentiation, and high-end development. Coal to ethylene glycol and coal to olefins even face homogeneous competition with petrochemical product models, as well as international competition with different raw material routes such as integrated refining and light hydrocarbon to olefin. Today's new challenges may be one of the major challenges that upgrading demonstration facilities will face.

Seeking progress while maintaining stability and promoting stable development through progress

New ideas for advancing new industrialization

New industrialization is an important engine for achieving high-quality development. The petrochemical industry, as an important pillar industry of the national economy, is also a resource-based, energy oriented, and fundamental supporting industry. This determines that the petrochemical industry should first achieve new industrialization, and the new industrialization of the petrochemical industry should take the lead in other fields of the national economy.

On the one hand, as a resource-based and energy based industry, the important characteristics of the petrochemical industry's new industrialization should be high technological level, low resource consumption, low emissions of "three wastes", and good economic benefits. Only by establishing such a modern petrochemical industry system can it meet the requirements of future industrial development, be a new industrialization with strong core competitiveness, and create a better life for humanity.

On the other hand, the petrochemical industry, as a basic and important supporting industry, can make due contributions to Chinese path to modernization only if the new industrialization level is ahead of other industrial fields. The new industrialization of chemical fertilizers and pesticide industries is the prerequisite and foundation for agricultural modernization; The new industrialization of coatings and pigments is the prerequisite and foundation for the construction and high-end coating manufacturing industry to achieve new industrialization; The new industrialization of fine chemicals such as synthetic fiber monomers, dyes, and feed additives (vitamins, methionine) is directly related to the new industrialization of important areas of the national economy such as textiles and modern animal husbandry; The new industrialization level of synthetic materials, new chemical materials, high-performance composite materials, etc. directly determines the new industrialization of important fields such as automobiles, rail transit, large aircraft, national defense and military industry, aerospace, etc; The new industrialization of high-end membrane materials, high-performance fiber materials, and biosynthesis is closely related to the new industrialization in fields such as new energy, electronic information, lunar exploration engineering, and life and health.

It can be seen that without the new industrialization of the petrochemical industry, a country's new industrialization system will be difficult to form; If the new industrialization of the petrochemical industry falls behind, a country's new industrialization process will be severely hindered. This is the key for developed countries to prioritize the development of the petrochemical industry, especially in the areas of new chemical materials, special functional materials, and specialized chemicals. Therefore, the new industrialization of China's petrochemical industry must be solidly promoted through self-reliance in high-level science and technology, accelerating green and low-carbon transformation, especially focusing on digital transformation and intelligent upgrading, accelerating intelligent transformation and networking through the construction of smart workshops, smart factories, and smart chemical parks, so that the new industrialization of the petrochemical industry can play its due role and make greater contributions to the realization of Chinese path to modernization.

Innovation drives "progress" with new breakthroughs

Innovation will remain at the heart of China's modernization drive. Innovation is the key element and primary driving force for the petrochemical industry and enterprises to move towards new industrialization and achieve high-quality development. In recent years, significant achievements have been made in key areas such as oil and gas exploration technology, new chemical materials, specialized chemicals, and modern coal chemical industry. However, weak innovation capabilities have always been a weakness and constraint for China to achieve the goal of becoming a petrochemical powerhouse. The high-quality development of the new era requires us to focus on high-level technological self-reliance and self-reliance, promote key core technology research and development, promote industrial and supply chain security and stability, improve total factor productivity, and enhance development quality and efficiency. The petrochemical industry should focus on the "four aspects", deeply implement the innovation driven strategy, build an industry innovation system, strengthen technological strategic support, take self-reliance and self-improvement as the core, overcome a number of "shortcomings" and "bottleneck" technologies that restrict the development of the industry, seize a number of technological high points, vigorously promote cross disciplinary and cross industry collaborative innovation, organize and implement innovation projects and establish innovation platforms, highlight the research and development of key common technologies, break through a number of key technologies, develop a number of high-end products, and promote the transition from a petrochemical power to a petrochemical power, taking critical steps.

In the innovation of new refining technologies, we will accelerate the upgrading of low-carbon deep processing technology for inferior residue, develop component refining, molecular refining, and direct chemical production technology for crude oil (heavy oil), improve the efficiency and selectivity of catalytic cracking, low-carbon alkane dehydrogenation, and hydrocracking reaction processes for crude oil (heavy oil), and increase the development and application of green, efficient, and independent refining catalysts.

Innovation in the field of modern coal chemical industry requires the implementation of major technological equipment research projects, acceleration of industrial technology optimization and upgrading, and promotion of original and integrated innovation. Accelerate technological innovations such as high-performance composite catalysts, one-step synthesis of olefins from syngas, and one-step synthesis of low-carbon alcohol ethers, to achieve industrial breakthroughs in coal to aromatics production; Focusing on large-scale and efficient coal gasification, new generation and efficient methanol to olefin technology equipment, as well as key raw materials and components, we will promote the industrial application of the first batch of (sub) materials, the first set of (equipment), and the first version of (sub) software for key technologies; Optimize and adjust product structure, accelerate the development and application of high-end product production technologies such as coal based new synthetic materials, advanced carbon materials, and biodegradable materials; Promote the coupled innovative development of modern coal chemical industry with renewable energy, green hydrogen, and CCUS (carbon capture, utilization, and storage); Promote the digital construction of modern coal chemical equipment and cultivate a group of typical intelligent production scenarios.

The key to the field of new materials in the chemical industry is to enhance independent innovation capabilities, mainly focusing on key core technologies, major common technologies, and high-performance materials, as well as continuous and stable production of built facilities. We will increase technological innovation efforts, with a focus on breaking through the research and development and production of high-end polyolefins, polyolefin elastomers, high-end EVA (ethylene vinyl acetate copolymer), EVOH (ethylene vinyl alcohol copolymer) films, long carbon chain nylon, and aromatic nylon, as well as some key monomers, bio based new materials, and high-performance biodegradable materials.

New achievements in green and low-carbon transformation

Promoting green and low-carbon economic and social development is a key link in achieving high-quality development. The petrochemical industry is a resource-based and energy based industry. In the process of implementing the "carbon peak and carbon neutrality" strategy and moving towards new industrialization, it faces new requirements and new situations for green and low-carbon development, and the challenges are more arduous and severe.

Unlike developed countries and the Gulf region, which use oil, natural gas, and light hydrocarbons as raw materials, China's petrochemical industry has a high proportion of coal as raw material in both raw material and fuel energy, resulting in much higher carbon emissions than natural gas and oil as raw materials. Compared with developed countries, the product structure of China's petrochemical industry is also biased, with an excess of bulk basic products and general materials, and a shortage of high-end products and high-performance materials. Developed countries mainly focus on new chemical materials and functional chemicals. In the process of producing basic chemicals, material consumption, energy consumption, and emissions are much higher than those of fine chemicals and high-performance materials. This requires us to base ourselves on the national conditions and resource endowments, the current situation of the petrochemical industry, and promote high-quality development of the petrochemical industry in accelerating green and low-carbon transformation.

Refining enterprises should actively adopt clean energy and green electricity substitution, promote clean energy substitution in existing coal-fired self owned power plants (boilers), actively explore and research the application of solar heating in the refining process, gradually reduce the proportion of coal consumption, and improve the consumption level of renewable energy. Increase the application of low-carbon production processes such as short process, enhanced reaction processes, and ultra-high pressure steam generation from catalytic cracking waste heat, and strengthen the collaborative control of methane and volatile organic compounds. Accelerate the demonstration application of CCUS, effectively reduce carbon emissions, and explore the development of hydrogen production tail gas and catalytic cracking flue gas carbon dioxide direct conversion, carbon dioxide dry reforming, carbon dioxide hydrogenation to produce oil products and chemical technology demonstrations. Explore the integration and development of renewable resources, vigorously develop hydrogen production from renewable resources, carry out green hydrogen refining demonstration projects, promote green hydrogen substitution, and gradually reduce the amount of hydrogen produced from coal. Research and develop low-carbon refining technology evaluation standards, and explore pilot projects for carbon emission measurement and monitoring in refining enterprises.

New measures to resolve overcapacity

The problem of overcapacity has become a prominent problem that troubles the healthy and sustainable development of industries and enterprises. Since the 21st century, China's petrochemical industry has developed rapidly, with products continuously enriching, scale expanding, and industrial concentration gradually increasing. Basic chemicals have shown an excess state, while high-end specialized chemicals and high-performance materials mainly rely on imports. High end specialized chemicals and high-performance materials are precisely essential supporting materials for China's high-end manufacturing industry, strategic emerging industries, as well as electronic information, aerospace and other fields. If the external dependence is too high, the security risk of China's industrial and supply chains will be too high.

Since the 13th Five Year Plan, new breakthroughs and progress have been made in chemical new materials, specialized chemicals, high-performance fibers, high-end membrane materials, etc. However, the effect of resolving overcapacity in bulk basic products and general materials is not significant enough, and even some products have seen an increase in overcapacity.

To resolve overcapacity, the first step is to transform the development concept. Many domestic enterprises today adopt the development model and philosophy of "building block operations, only adding without reducing" and "strengthening with the big", which is exactly the path that multinational corporations have taken 60 or 70 years ago. Nowadays, we have entered the era of global competition, especially as the domestic market has become a major platform for international competition. It is necessary to transform the inertia of development concepts and traditional development models.

The key to resolving overcapacity is to implement industrial policies effectively. Resolving overcapacity requires the petrochemical industry to understand and implement the spirit of the Central Economic Work Conference, fully, accurately and comprehensively implement the new development concept, and implement industrial policies that keep pace with the times.

An important measure to resolve overcapacity is to deepen supply side structural reform. The current overcapacity in the petrochemical industry is mainly due to severe overcapacity in bulk basic products and general materials, while high-end specialized chemicals and high-performance materials still rely on imports to a certain extent. This proves that it is necessary for domestic enterprises to deepen supply side structural reform, improve supply, expand the market, further increase supply types and models, enhance product quality and stability, and further enhance their supply capacity through innovation and research and development. There is also significant development space.