Chapter 6 - Oil Quality and its Environmental Impact

Abstract

This chapter discusses changes in crude production and consumption quality, based on the long-term crude projection, the evolution of China's environmental policies, and the degree to which oil quality specifications will be introduced or expanded. The chapter divides crude oil into three grades of sulfur content: low-sulfur (less than 0.5 percent), medium-sulfur (0.5–1 percent), and high-sulfur (more than 1.0 percent). On the basis of gravity, crude oil is distinguished as light crude if it is more than 30 degrees API, and heavy crude is less than 30 degrees API. Crude oil quality affects the quantity of each petroleum product that the refining industry can create, that eventually impacts the profitability of various kinds of refineries. Crude oil quality also affects the relative costs of producing various products and thereby influences product prices and the demand for each product over time. The current and future quality of Chinese crude oil is based primarily on data from the China National Petroleum Corporation (CNPC). In addition, Chinese crudes are generally deficient in asphalt, which is at present obtained in relatively small quantifies from Tarim and Liaohe crude and some of the Shengli crude. The environment in China is fragile and deteriorating. Air pollution caused by the burning of coal in industry and by household cooking and heating is a very serious problem in urban China. While environmental regulations play an increasingly important role in influencing the petroleum product market worldwide, they have yet not been a crucial determinant of petroleum supply and demand trend in China. Although China has set some environmental regulations for petroleum product consumption, they are lax in comparison with other countries in East Asia.