PetroChina to Shutter Major North China Refinery by End of June

PetroChina, China’s state-owned oil giant, will halt operations at the last crude unit of its largest North China refinery, Dalian Petrochemical Corp., on June 30, marking the country’s first complete closure of a state-run refining facility.

The shutdown of the 200,000-barrels-per-day (bpd) No. 1 crude unit, followed by secondary processing units in July, aligns with PetroChina’s plan to phase out the 410,000-bpd Dalian plant by mid-2025.

The closure reflects China’s shifting energy priorities, as global oil demand growth slows and domestic refining capacity faces rationalization. With plans for a smaller replacement facility on Changxing Island still pending, the move raises questions about China’s refining strategy amid rising geopolitical and market pressures.

Strategic Shutdown of Dalian Refinery

The Dalian refinery, which processes primarily Russian ESPO blend crude from Siberian fields, accounts for nearly 3% of China’s 18.5 million bpd refining capacity in 2024. PetroChina began winding down operations in late 2023, with the company now set to draw down crude oil and feedstock inventories starting this month and clear all product inventories by August.

The closure is part of a broader strategy to relocate and replace the aging Dalian facility with a more efficient plant. However, PetroChina has yet to finalize investment decisions for the proposed Changxing Island complex, located two hours from downtown Dalian, leaving the timeline for the new facility uncertain.

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Market and Geopolitical Context

The shutdown comes as China’s refining sector grapples with overcapacity and declining global oil demand growth, projected at 1.2 million bpd for 2025, down from 1.5 million bpd in 2024. Falling crude prices, with Brent at $60.23 per barrel in May 2025, and U.S. President Donald Trump’s tariff policies threatening global trade have squeezed refining margins.

Dalian’s reliance on Russian crude, which made up 40% of its 2024 feedstock at 164,000 bpd, ties the closure to geopolitical dynamics, as Western sanctions and the G7’s $60 price cap continue to pressure Russia’s oil exports. The decision also aligns with China’s push to optimize its refining footprint, with smaller, independent “teapot” refineries facing similar closures.

Economic and Industry Implications

The Dalian plant’s closure could disrupt local fuel supplies in Liaoning province, a key industrial hub, and impact jobs, though PetroChina has not disclosed workforce plans. China’s refining capacity utilization rate fell to 82% in 2024, reflecting overcapacity and weaker domestic demand, which grew only 2.3% last year.

The shift to a new facility could enhance efficiency and reduce emissions, supporting China’s carbon neutrality goal by 2060. However, delays in approving the Changxing Island project may strain PetroChina’s ability to maintain output in the region, potentially increasing reliance on imports or other domestic refineries.

Did You Know?
China’s refining capacity of 18.5 million bpd in 2024 makes it the world’s second-largest refiner, trailing only the U.S., which has a capacity of 19.2 million bpd.

Future of China’s Refining Landscape

PetroChina’s move signals a broader restructuring in China’s energy sector, as state-owned giants prioritize modernization over legacy infrastructure. The Dalian closure follows similar consolidations globally, with refineries in Europe and Asia shutting down due to low margins and stricter environmental regulations.

Industry analysts forecast that China may close or repurpose up to 1 million bpd of refining capacity by 2030 to align with declining oil demand and rising electric vehicle adoption, which reached 43% of new car sales in China in 2024. The Dalian shutdown could set a precedent for further rationalization, reshaping China’s role in global oil markets.