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China approves USD20 bln mega petchem complex in Shandong oil hub

June 25/2020

MOSCOW (MRC) -- China is reviving a USD20 billion petrochemical project in eastern Shandong province as part of efforts to dial up infrastructure spending to support an economy struggling with the impact of the coronavirus pandemic, reported Reuters with reference to two China-based industry sources.

The 400,000 barrel-per-day (bpd) refinery and 3 million ton-per-year ethylene plant in Yantai, Shandong, the countrys hub for independent oil refineries, was proposed years ago but approval has been slowing in coming because of Chinas struggle with excess refining capacity.

Chinas state planner, the National Development & Reform Commission (NDRC), gave initial approval on Monday for the project, allowing Shandong province to start planning for construction, said the sources with knowledge of the approval.

The investment in the project will be nearly 140 billion yuan (USD20 billion), according to one of the sources. China business registration data seen by Reuters showed Shandong Nanshan Group, a private aluminium smelter based in Yantai, will be the ventures lead investor, and other investors include chemical group Wanhua and the Shandong provincial government.

A representative for the project, Shandong Yulong Petrochemical, did not immediately comment. The NDRC did not immediately respond to a Reuters request for comment.

The two sources declined to be named as they are not authorised to speak to the media.

The project could help cut Chinas petrochemical imports but would likely worsen its surplus of refined fuel products.

Analysts expect the massive project to be operational around end of 2024, with revenue underpinned by petrochemicals, demand for which is more resilient than for transportation fuels that has been hit hard by the coronavirus.

"2024 is a good market entry point for Yulong as the global petrochemical industry starts to rebound from a downcycle resulting from previous overbuilds," said Harry Liu, consultant for downstream business for IHS Markit.

The Yulong project will be the latest addition to China's recent wave of petrochemical investments, which have been led by the private sector and drawn global giants like BASF and Exxon Mobil to build complexes in the world's top petrochemical consumer and importer.

A newcomer in the field of oil refining and petrochemicals, Yulong hired in 2018 Luo Qiang, a refinery veteran previously with state giant Sinopec, as its general manager who now heads a project team of over 500 staff, said the source.

Last month Yulong also awarded Sinopec Engineering a 170 million yuan contract for overall design for the complex, the two sources added. Sinopec Engineering declined to comment.

Yulong costs billions more than similar-sized plants, as some 20 billion yuan of the total cost will go to fund closures of small, inefficient plants Shandong province aims to mothball over the next few years to make room for Yulong, said the source.

The Shandong provincial government did not respond to requests for comment.

Shandong - home to more than 60 small plants known as "teapots" and more than one-fifth in Chinas total crude oil imports - has become less competitive in recent years after the start-up of large integrated petrochemical projects like Hengli Petrochemicals Dalian plant and Zhejiang Petrochemical Corps Zhoushan complex.

The giant Yulong project too faces headwinds.

"Yulong faces a tremendous challenge of disposing transport fuels... and that challenge could intensify if consolidation does not take place or falls short of expectation," said IHS Liu.

As MRC reported previously, Sinopec's greenfield 200,000 b/d Zhongke Petrochemical will not contribute notable throughput until July, although it officially came on stream on June 16, 2020. The Sinopec venture, situated in coastal city of Zhanjiang, comprises a 200,000 barrel per day (bpd) crude oil refinery and an 800,000 tonne-per-year ethylene facility, built at a cost of 44 billion yuan (USD6.2 billion). The cracker is expected to start production in August, 2020.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim.  At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.


mrcplast.com
Author:Margaret Volkova
Tags:PP, PE, LLDPE, crude and gaz condensate, PP random copolymer, propylene, LDPE, ethylene, petrochemistry, BASF, Exxon Mobil, Sinopec, China, Rossiya.
Category:General News
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