China approves new Guondong refinery project

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Mar. 2 -- China's National Development and Reform Commission has approved China National Petroleum Corp.'s plans to construct a 10-million-tonne/year refinery at Jieyang in southern Guangdong province.

The approval is the latest effort by the government to boost China's refining capacity in the wake of severe shortages over the past several years throughout the country, but especially in its southern regions.

"The refinery will help CNPC better tap the rising demand for petrochemical products in the Pearl River Delta region," said Cai Enming, an executive with China Petroleum and Chemical Association.

Although China's other two main oil companies, Sinopec and CNOOC, already have refineries in Guangdong, the facility marks a new departure for CNPC as most of its existing refineries are located in China's northeastern and northwestern regions.

Cai underlined the need for CNPC to operate a refinery closer to the market it serves, saying that, "The cost would be too high for CNPC to transport its products from these [northern] refineries to Guangdong."

Chinese media reported that the project would likely refine heavy oil imported from Venezuela.

The reports follow an announcement by CNPC on Feb. 13 that it has started a new research program that aims to lighten heavy crude oil, enabling it to build several refineries able to process such Venezuelan oil (OGJ Online, Feb. 20, 2009).

The announcement of the new refinery coincided with reports that the NDRC has revealed plans to increase the capacity of refineries in nine cities across the nation, mostly those owned by Sinopec Corp.:

-- The capacity of the 400,000 b/d Zhenhai refinery in Ningbo will be increased to 460,000 b/d by September of this year and eventually to 600,000 b/d.

-- In Shanghai, the combined capacity of the 280,000 b/d Jinshan and the 220,000 b/d Gaoqiao refineries will be boosted by 100,000 b/d to 600,000 b/d.

-- In Nanjin, the combined capacity of the 260,000 b/d Jinling refinery and the 160,000 b/d Yanzi refinery will be boosted to levels similar to those in Ningbo or Shanghai.

-- The cities of Maoming, Guangzhou, Huizhou, Quanzhou, and Tianjin will each see refinery capacity boosted to 400,000 b/d.

-- Construction on a refinery is scheduled in Caofeidian.

Meanwhile, CNOOC—after a 6-month delay for unspecified reasons—is set to commission its 240,000 b/d refinery at Huizhou, in Guangdong province, to operate on a trial basis when it goes online in March.

Earlier this month, the QingLanShan crude oil terminal at the Fujian refinery received its first supplies of Saudi crude oil—a 900,000-bbl load of Arabian Extra Light carried from Ras Tanura by the tanker Cosbright Lake.

The QingLanShan terminal is the oil receiving port of Fujian Refining & Petrochemical Co. Ltd. (Frep) joint venture, which is developing an integrated refining and petrochemical manufacturing complex.

The undertaking is being developed by a consortium of Fujian Petrochemical Co. Ltd., Saudi Aramco Sino Co. Ltd., and ExxonMobil China Petroleum & Petrochemical Co. Ltd., which was established Mar. 31, 2007.

The project, which includes a 240,000-b/d refinery and will produce 2.2 million tonnes of petrochemicals a year, is in its final stage of construction. The Frep expansion is due on stream during the first half of this year.

"With the inauguration of this deepwater terminal, Frep-JV is demonstrating its readiness to help meet China's domestic oil demand as well as future demand," said Ibrahim Q. Al-Buainain, director of Asia Joint Ventures, on behalf of Saudi Aramco.

"The arrival of the Arabian crude oil to this terminal signifies Saudi Aramco's supply commitment as a shareholder, and I would like to assure you that a stream of Saudi Arabian crude is now making its steady flow to Fujian Province and that it will continue for many generations," said Al-Buainain.

Contact Eric Watkins at hippalus@yahoo.com.

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