Longhai Petrochemical to Invest $272 Million in Southwestern China's First Heavy Oil Refinery

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Researched by Industrial Info Resources (Sugar Land, Texas)--Privately held Chongqing Longhai Petrochemical Company plans to invest $272 million in the construction of a heavy oil refinery in the Fuling District of Chongqing Municipality. Longhai had signed an agreement with the district government in April 2007. The first phase of the refinery will have the capacity to process 500,000 tons per year of crude oil. The second and third phrases of the project will expand the capacity to 2 million tons per year. This will be the first heavy oil refinery in southwestern China.

The refinery's designed annual production is 1.1 million tons of diesel, 330,000 tons of gasoline, 63,000 tons of liquefied petroleum gas, 287,000 tons of coke and 30,000 tons of sulfur. The long-term annual value of production is expected to reach between $1.08 billion and $1.36 billion.

Longhai will import crude oil from overseas for this refinery. It plans to receive international oil shipments at Shanghai Port and then transfer them to Chongqing. For this purpose, Longhai plans to build its own oil ship locks. Insiders say that the price of heavy oil on the international market is about $408 per ton and that the overall sales value after refining will be $680. With $11 per ton added to transportation costs, there is still a considerable profit margin for Longhai.

Presently, China National Petroleum Corporation (CNPC) (Beijing) is planning a 10 million-ton refinery in Chongqing. The site of the CNPC refinery has been chosen and is in the process of permit application. The $2.04 billion refinery will be built in Changshou County of Chongqing Municipality. It will produce 6.5 million tons per year of refined. This will help to alleviate the refined oil supply shortage in Chongqing and at the same time promote the development of steel making, automobile, textiles and construction industries. The expected sales from this refinery are expected to reach $3.8 billion.

Based on the current refined oil consumption in Chongqing, it is projected that by 2010, 1,200 gas stations will need to be built. By 2020, 1,600 gas stations will be needed.

Since the 1980s, Chongqing Municipality has wanted to build a large refinery. However, the resource of sufficient crude has always been a problem. The China-Myanmar oil pipeline in planning will finally provide the solution to this issue.

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