Gregg Laskoski is a senior petroleum analyst for GasBuddy.com.
The U.S. Department of Energy says the number of U.S. refineries has been cut in half since 1950 and approximately half of the nation's refining capacity resides in Texas and Louisiana. Although we have fewer refineries today, their capacity is increasing. However, the east coast is set to see its refining capacity cut in half (by 700,000 barrels per day) if the Sunoco Philadelphia refinery, the third of three Pennsylvania refineries to shut down, closes as scheduled on July 1. For east coast refineries, reliance on foreign oil (Brent crude) arriving on tankers precludes profitability.
China, on the other hand, is investing more than $40 billion building refineries at home and in Egypt, Nigeria, and Saudi Arabia. With the Saudis, China's deal is simply "the largest expansion by any oil company in the world", and as a result, Chinese petroleum company Sinopec's deal earlier this year with Saudi oil giant Aramco will allow a major oil refinery to become operational in the Red Sea port of Yanbu by 2014.
The Yanbu project is an $8.5 billion joint venture, which covers an area of about 5.2 million square meters. It is expected to process 400,000 barrels of heavy crude oil per day, according to Bloomberg. Aramco will hold a 62.5 percent stake in the plant while Sinopec will own the remaining 37.5 percent.
By all accounts China's investment in oil infrastructure and refining capacity, at home and abroad, supports a long-term strategy of developing world-class refining facilities in partnership with OPEC suppliers. Such relationships mean economic leverage that could soon make China OPEC's premiere purchaser and subordinate U.S. relations with the same countries.
Also underway is a joint project to build Egypt's largest refinery ever. In its agreement with Nigeria, China is investing $23 billion to build three refineries (combined 750,000 barrels per day of refining capacity) and a fuel storage complex.
(In recent years China has also expressed an interest in exploring for oil in southern Venezuela and granted a $20 billion loan to Venezuela to secure oil supplies there too.)
Obviously, China's political system eliminates the dialogue we are afforded by democracy and the representation that goes with it. But clearly, China is planning for a future they see at least 50 to 100 years or more from now. U.S. initiative and direction doesn't seem to look seriously past November.
Perhaps that's unavoidable. President Obama is in a position where he must seek re-election and is therefore trying to sell something. He advocates an energy policy with the hopes that Americans fall in love with the idea of clean energy even if geology, engineering, and physics confirm that fossil fuels are more energy-efficient.
Candidates sometimes do strange things. Regrettably, in January he turned down TransCanada's application, submitted in September 2008, to build the Keystone pipeline, only to seize a gratuitous photo-op months later (at the Cushing Pipe Yard in Cushing, Okla.) where he announced support for the only part of the pipeline that does not require any approval.
The president apparently abhors energy from fossil fuels and refers to petroleum as "the fuel of the past" when he talks about his "all of the above" energy policy. He frowns on offshore oil drilling and says nary a word about oil refining.
Instead his enthusiasm is reserved for expanding the use of renewable fuels, such as wind, solar, and biofuels. "It's time," he says, "to double down on clean energy industries that have never been more promising."
Is China misinformed?