Sinopec Considers Raising $5 Billion to Build Joint-Venture Refinery in Guangzhou City, Guangdong Province

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Researched by Industrial Info Resources (Sugar Land, Texas)--Sinopec (HKSE: 0386) (Beijing) is considering raising $5 billion to build a joint-venture refinery in Guangzhou City, Guangdong Province. The project has an oil-refining capacity of 15 million tons and an ethylene-production capacity of 1 million tons. Stakeholders that are now carrying out or have already carried out negotiations with Sinopec include Kuwait Petroleum Corporation (KPC) (Safat, Kuwait), Dow Chemical (Midland, Michigan) and Royal Dutch/Shell. Among candidate cities to host this project, Guangzhou City is most likely to be chosen.

Rumors about the project started near the end of 2005 when Sinopec and KPC first put forward the idea about joining hands to build a large petrochemical project in Guangdong Province. Oil supply to this project would mainly be provided by KPC as agreed by the two parties back then. In this way, KPC could both increase its oil export to and market share in China.

When the rumors started spreading, quite a few cities, including Guangzhou City, Huizhou City, Zhuhai City, Shantou City, Zhanjiang City and Maoming City, bid to host this project. Currently, it looks like the Nansha District of Guangzhou City has the best chance to win.

The project’s launch bears significance in two ways. On one hand, by putting this project in place, Sinopec expects to have a secure oil supply as it is strained on the global market. According to Sinopec, its demand for imported oil in 2007 stands at 135.1 million tons. On the other hand, once this project goes into full production, it will deliver a substantial relief to the energy strain in the Pearl River Delta.

Currently, the largest oil producer in Pearl River Delta is Sinopec’s Guangzhou branch. It can process 13 million tons of crude oil per year, 1.85 million tons of gas, 1.27 million tons of jet fuel and 5.08 million tons of diesel.

If the project lands in Guangzhou, Sinopec can further expand the production capacity of its Guangzhou branch by interacting positively with the new project. It is expected that by 2010, Guangzhou will host a world-class petrochemical industrial base whose refining capacity will reach 30 million tons per year and ethylene production capacity will reach 20 million tons per year.

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