CNPC plans pipeline JV in Shandong province

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Dec. 4 -- China National Petroleum Corp. established a joint venture with domestic refiner Shandong Dongming Petrochemical Group Co. Ltd. to build and operate a 462-km crude pipeline in Shandong province from the port city of Rizhao to the Dongming refinery.

According to BMI analysts, the pipeline is part of CNPC's strategy for enhancing its oil and gas transport and distribution systems in China.

“The pipeline also demonstrates that CNPC is increasing its involvement in a region previously dominated by other companies, including China Petroleum & Chemical Corp., which owns refineries in both Henan and Shandong provinces,” BMI said.

CNPC said the pipeline will have a capacity of 10 million tonnes/year in the first phase of construction, rising to 20 million tpy in the second phase.

Start up of first phase of the $293 million line is scheduled for June 2011. No date was provided for construction or start up of Phase 2.

Using domestic crude supplied from Xinjiang as well as imported fuel oil, the Dongming facility currently produces 100,000-140,000 tonnes/month of refined products, sold mainly into Shandong and nearby eastern China provinces.

However, it is expected to increase its designed crude processing capacity to 6 million tpy from the current 3 million tpy by yearend, with further plans for construction of a 5 million tpy crude distillation unit from 2010.

Word of the expansions came in August when Shandong Dongming Petrochem signed an agreement with Singapore-based logistics services provider Freight Links Group to build an additional 5 million tpy refining complex. The projected complex would consist of a 1.5 million tpy fluid catalytic cracker; a 1.6 million tpy delayed coker; and a 2 million tpy hydrotreater.

Shandong Dongming Petrochem also negotiated with Total SA in August about possible cooperation on an oil products retail terminal network. In October, however, a 5 million ton refining plan by the two firms came to nothing after the Chinese company reportedly set a higher policy threshold for joint-venture refining projects.

In addition to its projects with Shandong Dongming Petrochem, CNPC launched construction of six other oil and gas pipelines in the region, including the Northern Xinjiang natural gas pipeline, the Huianpu-Yinchuan crude pipeline, the Shikong-Lanzhou crude pipeline, and the Shandong natural gas pipeline.

Contact Eric Watkins at hippalus@yahoo.com.

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