CNPC starts construction of refinery, pipeline system

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Sept. 13 -- China National Petroleum Corp. has begun construction of two pipelines and a refinery in China’s Yunnan province aimed at transporting and processing oil and natural gas to be imported from Myanmar starting in 2013.

The oil and gas pipeline development is in line with China's aim of diversifying the methods and sources of its imports, according to Yunnan Gov. Qin Guangrong. “It will lessen risks and strengthen China's ability to cope with the complex and volatile international situation," he said.

CNPC launched construction of the two pipelines in Anning city near Kunming, the capital of Yunnan province in southwestern China. The planned 440,000-b/d oil pipeline and the 12 billion cu m gas pipeline both start at Kyaukryu port on the west coast of Myanmar, where construction began in June.

Oil for the line will come from China’s Middle Eastern and African suppliers, while the gas line will be fed by fields in Myanmar, which has the most extensive gas reserves in Southeast Asia at 21.2 tcf.

Analysts said the oil line will enable China to bypass the sea route through the piracy-prone Strait of Malacca, while the gas line will help meet rapidly expanding demand in southern China (OGJ Online, June 4, 2010).

Each pipeline extends 800 km inside Myanmar before entering China at the border city of Ruili, in Yunnan province. The two lines each will then extend a further 1,700 km inside the province before reaching their destinations.

Refinery construction
Along with the pipelines, CNPC also began building the 200,000-b/d refinery in Anning City. The $3.4 billion project is to include a 10 million million tonne/year crude distillation unit and 14 other main processing facilities. Feedstock crude for the refinery will come via the new pipeline from Myanmar.

The pipeline and refinery projects are expected to come online together by yearend 2013, and could produce 7.8 million tpy of oil products for Yunnan province and its neighbors Guizhou province and the Guangxi Zhuang Autonomous Region.

Construction of the pipelines and refinery follow reports that CNPC subsidiary PetroChina plans to build three product pipelines in Yunnan Province—all of them leading from the Anning refinery.

The three pipelines—Anning-Kunming-Qujing, Anning-Chuxiong-Dali-Baoshan, and Anning-Yuxi-Mengzi-Wenshan—will each transport products throughout Yunnan province as well as to the neighboring regions.

Analyst IHS Global Insight said the three lines will support “efficient allocation of oil products from Anning to northeastern, northwestern, and southern areas of Yunnan province.”

The analyst said that such efficiency “will allow PetroChina to build on its current 20% market share in the province, which is traditionally dominated by Sinopec via the Southwest China Oil Product Pipeline.”

IHS Global Insight also said that these efforts build on PetroChina's launch of the Qinzhou refinery, which will improve the company's competitive edge in southern provinces by “reducing transportation times and the high costs of supplying oil from large fields in northern China to Yunnan.”

The lines from Myanmar, the Anning refinery, and the three product pipelines are all part of China’s effort to boost its domestic refining capacity and reduces its dependence on expensive imports.

In a new refinery building boom, industry officials and Chinese media report that Beijing plans to add more than 3 million b/d of new refining capacity between 2010 and 2015.

Contact Eric Watkins at [email protected].