Beijing plans huge build-up in oil refineries
Target of 31 large-scale plants by 2015 to cut dependence on imports
The mainland aims to have 31 refineries each capable of processing 10 million tonnes of crude oil annually by 2015, up from about 20 planned for 2010 and nine at the end of last year, according to a media report.
The plan highlights the nation's huge appetite for fuel and hence crude imports, as slow growth in domestic crude output struggled to cope with surging demand.
Building a new 10-million-tonne-a-year refinery can cost about 15 billion yuan, and investment for a one million tonne ethylene plant and related downstream facilities is about 22 billion yuan, based on projects that just began construction such as PetroChina's refinery in Guangxi and China Petroleum and Chemical (Sinopec)'s ethylene plant in Tianjin.
Refinery expansion projects would require an outlay of two billion yuan for every one million tonnes of expanded capacity, the report said.
The National Development and Reform Commission, which sets industry policy and approves key projects, has planned for 31 refineries processing 10 million tonnes a year and 30 ethylene plant handling one million tonnes a year, Economic Observer quoted an unnamed NDRC official as saying.
Newly built refineries and ethylene plants tend to be integrated in one location for maximum operating efficiency.
The report quoted an official in Sinopec's planning department as saying that about 20 refineries capable of handling 10 millions tonnes annually were on its drawing board. About 30 per cent are new and the rest are expansion projects. They are mostly in the south and east of the country.
It also said that PetroChina was mulling at least 10 refineries of such scale, including two in Daqing, Heilongjiang province, one each in Fushun, Jinzhou, Dalian and Huludao in Liaoning province, two in Lanzhou, Gansu province, and three in the Xinjiang autonomous region.
A common location on both companies' new refinery wish lists is Caofeidian, Heibei province, where PetroChina recently announced a giant oil discovery.
Sinopec appears to have a head start as it is close to completing a large oil terminal there and has signed a preliminary agreement on refinery and petrochemical plant construction with the provincial government, although PetroChina can catch up because it has the oil source for a refinery.
According to Sinopec's annual report filed with the Securities and Exchange Commission in the United States, the company had seven refineries with annual capacity between 10 million and 20 million tonnes at the end of last year. PetroChina had two of such scale, its SEC filing showed.
A Sinopec spokesman declined to comment on projects being planned. A spokesman for PetroChina could not be reached.
The country's oil refining throughput rose to 306.5 million tonnes last year, from 273 million tonnes in 2004. This represented an average annual growth rate of 4 per cent, outstripping the less than 2 per cent growth in oil production in the same period. Oil import dependency rose to 47 per cent from 40 per cent.
The NDRC's reported 2015 ethylene plan looks even more impressive than its scheme for refineries, given PetroChina and Sinopec last year only produced 8.2 million tonnes of the base chemical and the agency's 2010 plan announced in December 2005 called for a capacity of 10.58 million tonnes.
The 2015 plan could substantially cut the mainland's ethylene import dependency rate of about 45 per cent, but could contribute to global capacity surplus.
Citigroup projected that North Asia will add 9.84 million tonnes of annual ethylene capacity between this year and 2010, or about 30 per cent of the global addition.
Huge appetite
Domestic oil output struggles to cope with surging demand
Estimated cost of a refinery handling 10 million tonnes a year, in yuan: 15b yuan