China's main economic planning body, the NDRC, has issued new guidelines for the development of the petrochemical industry that could compel some oil companies to redraft planned projects.
New refineries must have a minimum 300,000 b/d of capacity, says the NDRC, which has powers to approve or reject construction projects. They must be able to desulphurise all motor fuel output to 10ppm (0.001pc). In light of the country's shortage of ethylene and paraxylene (PX), capacity of naphtha crackers and PX plants must have a minimum 50,000 b/d and 12,000 b/d (600,000 t/yr) of capacity respectively.
In addition to its new ground rules for conventional oil projects, methanol-to-olefin (MTO) projects must have a minimum 500,000 t/yr of capacity. Methylene diphenyl diisocyanate projects, which is the raw material used in making furniture, shoes and athletic equipment, must meet a minimum 400,000 t/yr scale.
The NDRC's insistence on large-scale developments is also intended to improve safety standards. It wants to control capacity, with rampant expansion associated with a lack of safety measures. This follows an explosion at private-sector producer Dragon Aromatics' petrochemical plant at Gulei in east China's Fujian province in April this year, which further undermined public confidence in such plants. The explosion forced Dragon to shut its 90,000 b/d condensate splitter and a 4.5mn t/yr purified terephthalic acid plant operated by sister company Xianglu Petrochemical. The NDRC put the cause of the explosion down to weak environmental safeguards and local government supervision.
The NDRC shortly after the disaster at the Dragon plant approved plans, possibly by Chinese state-controlled oil firm Sinopec and a group of Taiwanese petrochemical companies, to build a refining and petrochemical base at Gulei comprising a 300,000 b/d refinery, 50,000 b/d ethylene cracker and 1mn t/yr aromatics plant. By approving this project, the NDRC is indirectly ruling out other possible proposals, streamlining what can be built at Gulei in the future.
The NDRC is pushing for a relocation of many refineries from built-up urban areas to designated petrochemical clusters further away from habitation. But the new ruling also caps the size of these bases at 800,000 b/d of crude distillation capacity and requires that they include 38mn bl (6mn m³) of crude and products storage capacity.
State-controlled firms have disclosed proposals to build some 2.4mn b/d of new refining capacity, mostly in coastal China. But some of the planned plants may fall foul of the new rules. Those now appearing too small in scale are a 240,000 b/d plant at Caofeidian in northeast China, for which Sinopec obtained approval in January, and a 260,000 b/d joint-venture refinery between Russian oil firm Rosneft and Chinese state-controlled oil firm PetroChina at nearby Tianjin.
Sinopec has not yet decided whether to resubmit plans for Caofeidian, which had no firm timeframe. The next refinery it aims to start will be a 300,000 b/d project at Zhanjiang in south China's Guangdong. The timeframe for the Tianjin plant is also unclear.
The NDRC plans to allow provincial governments a greater say in whether to approve petrochemical projects. They will be given more responsibility to approve refineries, ethylene, PX and coal-to-olefin (CTO) projects. Beijing in 2011 ruled that only the NDRC was allowed to approve CTO and MTO projects in an effort to rein in overcapacity. But it plans to increase local government accountability when projects such as Gulei — which had strong local government backing — go wrong. It has set up a team comprising central and local NDRC officials, state firms, consultancies and industry lobby groups to be housed at the China National Petroleum and Chemical Planning Institute, an industry body that also does consultancy work for the NDRC and state-controlled firms like Sinopec. This aims to increase oversight and monitoring of such projects.
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