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Increasing ethylene capacity in China will entail additional crude oil imports

December 17/2009
December, 17 ( -- Guided by the fact that 50% of China"s ethylene demand has to be satisfied by imports, China"s largest petrochemical producer Sinopec Corp. plans to augment its ethylene capacities. Its parent, The Sinopec Group has recently accelerated the building of ethylene capacities with a decision to build another 800,000 tpa ethylene project in Wuhan, central Hubei province; a 1 mln tpa ethylene project in Tianjin with Saudi Arabia; and a 1 mln tpa project in Zhanjiang with Qatar. With this, Sinopecs capacities will increase by 3 mln tons by 2013, requiring atleast 20 mln tons of crude oil as feedstock. This will translate to about 50% of Sinopec"s crude oil output of 41.80 mln tons in 2008. Sinopec is relatively weak in the upstream sector, and will have to secure feedstock for ethylene production with increased crude oil imports. In the short term, the feedstock requirement could be sourced from the newly acquired Addax Petroleum, which is expected to bring 17 mln tons of equity oil to Sinopec; and its ethylene JV projects in Tianjin and Zhanjiang with foreign oil firms will feed on crude oil provided by the foreigners. But in the long term, the added crude oil requirement totaling to 28 mln tpa by 2012, will place Sinopec in a precarious position. Also, as several new projects come onstream in the Middle East, the increased low cost ethylene from the region will inevitably impact Sinopec"s plan. Also, the oil price boom of 2008 has taught the markets that oil price spike can get uncontainable.


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