China Petroleum & Chemical Corporation, or Sinopec Ltd, is a Beijing-based oil and gas company which is listed in Hong Kong, Shanghai and New York (NYSE: SNP). It is one of the world’s biggest companies by revenue. Sinopec Ltd’s parent, Sinopec Group is one of China’s biggest petroleum groups.
Sinopec Shanghai plant project to reduce energy costs by 15pc
Sinopec Shanghai Petrochemical - one of China's largest integrated petrochemical makers - expects to slash about 15 per cent of its energy bill following the completion of an ethylene plant expansion last month, according to vice-president Rong Guangdao.
The expansion is a key part of the H share's phase-four capacity enhancement project, budgeted at 6.5 billion yuan (about HK$6.08 billion), expected to be completed 5 per cent to 10 per cent under budget by August.
The project is expected to boost the company's overall petrochemical production capacity by 20 per cent this year, and by 30 per cent next year.
The company has undergone a 22-month renovation on its ethylene plant to upgrade its annual production capacity from 400,000 tonnes to 700,000 tonnes.
Energy accounted for about 20 per cent of the firm's refining costs, executive director Zhang Jingming said.
A 15 per cent cut in its energy bill would cause a fall of about 3 per cent in refining costs.
The capacity enhancement scheme also included a new 200,000-tonne-a-year polypropylene plant and a new 250,000 tonne a year polyethylene plant, as well as the upgrading of its acrylic fibre plant from 30,000 tonnes to 66,000 tonnes a year.
Mr Zhang estimated the upgrade would cut the production cost of acrylic fibre by about 13 per cent, or 1,000 yuan per tonne.
Mr Rong believed the company's operating scale and production costs are in line with international levels but conceded the company was well behind international petrochemical giants such as Dupont and ExxonMobil in product development and marketing.
But he said the capacity upgrade project had enhanced the company's overall competitiveness compared with its international rivals, which took up about half the mainland's petrochemical market.
He played down concerns the project would result in oversupply, saying increased domestic supply will replace imports.
Sinopec Shanghai experienced the worst industry slump since the 1998 regional economic crisis, on the back of sharp falls in petrochemical prices amid the global economic slump.
It dived into the red for the three months to March with a loss of 165.95 million yuan, after booking a 79.6 per cent fall in net profit to 170.78 million yuan last year.
Mr Rong said the company's profitability had returned to levels seen in 1999 and 2000, as product prices had risen 30 per cent to 50 per cent last month compared with January - the trough of the current industry cycle.