CNPC’s Million Ton Ethylene Project to be Built in Shaanxi Province

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Researched by Industrial Info Resources (Sugar Land, Texas). China National Petroleum Corporation (CNPC) (Beijing, China) and Shaanxi Provincial Government signed an agreement to build a million ton ethylene project in Northern Shaanxi Province’s Yan’an city.

CNPC’s General Manager Jiang Jiemin and Shaanxi Provincial Governor Yuan Chunqing attended the contract signing ceremony. They both acknowledged that this ethylene project is a critical part of the strategic cooperation between CNPC and Shaanxi Province on oil upstream and downstream industry integration. It will play an important role in boosting the economic development in Northern Shaanxi. Sufficient preparatory work was carried out before the signing of the contract. At the end of 2006, the Third Yan’an City Communist Party Congress listed this million ton ethylene project as the number one project of its Ten Key Projects for 2007. It is also one of the key projects for Shaanxi Province.

According to the planning by Yan’an city, the project will include a million ton ethylene cracking and gasoline hydro-treating unit, and a 350,000 ton polypropylene production unit. The total investment into the project will be around $2.86 billion; the projected average annual sales will be $2.17 billion. A $586 million will be achieved in profit before tax every year.

Preliminary decisions on the site choice for the Shaanxi million ton ethylene project has been made. It will be built in Yangshu New Chemical Zone in Yan’an city’s Luochuan County. Construction of Yangshu New Chemical Zone started in April 2006. The major water supply for the project will be Nangoumen Reservoir, whose construction started in the first half of 2006 as well. The reservoir project will most possibly make its way to the Chinese Ministry of Water Resources’ list of Key Projects.

Northern Shaanxi is rich in coal, oil and natural gas reserve. The coal production in Northern Shaanxi has exceeded 100 million tons, while the total reserve exceeding 7.1 billion tons. Six million megawatts of power projects are waiting to be approved by the National Development and Reform Commission. Eight billion cubic meters of natural gas has been discovered and is being explored, serving the needs in Ningxia Autonomous Region, Beijing, and Tianjin City. The explored geological oil reserve in Northern Shaanxi is over 4.3 billion tons. All these resources can provide raw material for ethylene cracking. The latest statistics show that the crude oil production in Yan’an city in 2006 reached 8.1 million tons and the existing facilities’ maximum annual refining capacity is 8.77 million tons.

Shaanxi province is located in between the existing ethylene production bases along China’s east coast and its Northwestern Xinjiang Autonomous Region. So, this project fills the needs for ethylene in China’s central interior region.

CNPC’s research institution estimates that the need for ethylene in China will reach 27 million tons by 2010, and 50 million tons by 2020. If China wants to provide itself with 60% of all the ethylene it needs 20 million tons of ethylene production capacity will need to be added by 2020. The million ton ethylene project in Shaanxi province is part of CNPC’s strategic upgrading of its network of large scale refining and petrochemical integrated enterprises.

According the contract signed between Shaanxi’s government and CNPC, a legal entity will be jointly established in Yan’an city with CNPC controlling its stocks. The details of investment structure will be discussed further in a later date.

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