Refinery Building Boom in China Aimed at 450 Million Ton Target

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Researched by Industrial Info Resources (Sugar Land, Texas). China will raise its oil refining capacity from the current 350 million tons per annum (tpa) (about 7.5 million barrels per day) to 450 million tpa (about 9.6 million barrels per day) by 2012 according to a government source. This target was announced in a week when it was revealed that the largest oilfield to be discovered in China over a period of ten years in Bohai Bay, in eastern China, is estimated to hold reserves of 2.2 billion barrels and could reach an output of 200,800 barrels per day in 3 years.

China National Petroleum Corporation (CNPC) (Beijing) estimates that oil demand in the country will reach 455 million tons by the end of the eleventh Five-Year-Plan in 2010. Through 2010, the average oil demand will grow 6.5% per annum.

Running at 90% to 95% capacity by 2010, the country’s oil refineries and petrochemical cracker plants will produce 18 million tons of ethylene. In 2006 ethylene production stood at 9.412 million tons, which was a year-on-year increase of 24.5%.

Foreign investors are seeing this production platform as a scenario for increased investment and Sabic Asia Pacific (Singapore) has plans to construct a $5 billion integrated refining and petrochemical complex in Dalian in northeast China. Plans for the complex include a 10 million ton oil refinery, a one million ton ethylene cracker and an 800,000 tpa aromatics plant.

Sabic says the project will be a joint venture between several parties holding equal stakes, and a major state owned energy company is being sought to join the venture. Sabic has already invested in a petrochemical plant in Tianjin, China with Sinopec (NYSE:SHI) (Beijing, China) the country’s leading refiner. The project still has to receive approval from the country’s central economic planning body, the National Development and Reform Commission.

CNPC and Sinopec are expanding and planning further expansions for their refining and petrochemical projects in the provinces of Sichuan and Fujian and the Guangxi Zhuang Autonomous Region to meet fuel demand. Sabic views the downstream segment of the Chinese oil industry as having good future potential. The company will not produce gasoline, which it sees as oversupplied in the market, but instead concentrate on high demand oil and petrochemical products.

Sinopec began operations at an 8 million ton Hainan refining complex in 2006 and is at the preliminary site of its 10 million ton Qingdao project. It is also expanding the Quanzhou refinery from 4 million to 12 million tpa capacity.

CNPC is constructing a 1 million ton project in Xinjiang and has a 2 millon tpa project in progress at Dalian Petrochemical. It has received the go-ahead for a 10 million tpa refinery in Quanzhou on which construction will start in 2008 or 2009.

The ports of Tianjin, Lianyugang, Guangzhou and Caofeidian have plans to build 1 million ton refineries as well.

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