As a global economic powerhouse, Japan was once the second largest consumer of oil after the United States. Its petroleum refining capacity is also second only to the United States, ranking second in the world.
After the new millennium, with the strong rise of the Chinese and Indian economies, Japan's oil consumption has retreated to the fourth place. Japan's refining capacity is also declining in the oil consumption rankings, and it is experiencing a major rout.
Declining Japanese oil refining production
In the 30 years from the 80s to 2010, Japan consumed more than 200 million tons of oil annually. 1996 was the peak of Japan's oil consumption, reaching 5.7 million barrels per day, or about 28.5 billion tons. Japan's oil imports from the Middle East are mainly first-class, and they need to be smelted and processed when they are brought back to China. Therefore, Japan's refining capacity during this period was also the second in the world, with an annual refining capacity of more than 2900 million tons, second only to the United States.
The so-called heyday coincided with the beginning of decline, and due to demographic and economic changes, Japan's oil consumption has been declining year by year since 1996, with an average annual decline of nearly 15% or more. By 2009, the average daily consumption had fallen to 4.4 million barrels, accounting for 5 percent of the world's total consumption1%, compared with 4.8 million to 5 million barrels per day of refining capacity during the same period.
Over the next decade, Japan's refining capacity shrank as oil consumption declined. In the past 2023, Japan's daily oil consumption has fallen to 3.3 million barrels per day, less than a quarter of China's consumption. This was followed by the successive closures of Japanese petrochemical refineries, just in the last three years
At the end of 2021, Mitsubishi Chemical decided to exit its petrochemical and coal chemical businesses in the next few years.
In January 2022, Nippon Oil Co., Ltd., Japan's largest oil company, announced that it would close its Wakayama refinery in western Japan around October 2023 due to declining gasoline demand. The refinery had been in operation for 80 years before that.
In April 2022, Japan's second-largest oil company, Idemitsu Kosan Co., Ltd., planned to completely withdraw from acrylic acid and butyl acrylate (BA) production by March 2023 and cut refining capacity by 13%.
In April 2022, Sumitomo Chemical announced its decision to exit its caprolactam business and close its production facility in Ehime, Japan, by October 2022.
At present, the number of refineries in Japan has been sharply reduced from 29 in the past to 21, with a total processing capacity of about 3.1 million barrels per day and an annual refining capacity of about 1600 million tons, almost halved from the peak. Most of these refineries are located along the coast, close to major ports, which greatly reduces transportation costs and improves refining efficiency.
Compared to new refineries in Asia, including China, South Korea and India, Japanese refineries are smaller and less complex, built mainly to meet domestic fuel needs, and they are not very competitive in the international market.
According to Japan's Ministry of Economy, Trade and Industry, Japan's demand for petroleum products is expected to decline at a rate of 2 percent per year, which is equivalent to the abolition or termination of the production equipment of several large integrated refineries, and the refining industry will continue to shrink.
Compared with Japan, China's total refining capacity has surpassed that of the United States, ranking first in the world. China's petrochemical industry ranks first in the world in the fields of oil refining, ethylene, methanol, PTA and other fields.
In recent years, small refineries have been eliminated one after another, and the rapid development of refining and chemical integration has become a new trend in the transformation of domestic refineries. China is already the world's largest country in terms of new refining capacity in the future, and it is expected to add another 80 million tons of refining capacity in the next three years. It is mainly concentrated in Zhenhai Refining & Chemical, Yulong Refining & Chemical, Daxie Refining & Chemical, Huajin Refining & Chemical, Gulei Refining & Chemical and other projects.
The data shows that in the past 2023, China's first-class processing capacity will exceed 9800 million tons, with an annual processing capacity of 67.6 billion tons, refining capacity utilization rate of 735%, and the annual refining capacity is more than 6 times that of Japan. Domestic oil refining enterprises are mainly Sinopec and PetroChina, plus trillion-dollar market capitalization giants CNOOC, Sinochem, private enterprises and foreign capital and other diversified entities, with a total of 34 refineries with a production capacity of 10 million tons.
According to estimates, around 2027-2028, China's refined oil consumption will reach its peak, with the increase in the proportion of new energy and clean energy in energy consumption, China's refinery transformation to increase the production of chemical raw materials has become an inevitable development trend.