China's state-controlled Huajin is poised to start construction of a long-mooted 300,000 b/d refinery at Panjin in Liaoning province, intensifying downstream competition in the country's northeast.
Huajin, a unit of state-controlled Norinco, will take a 71pc stake in the project, with local-government owned Sincen holding the remaining 29pc, a source close to the project said. It was previously planned as a 36:35:29 venture between Huajin, Saudi Arabia's state-controlled Saudi Aramco and Sincen, but Aramco withdrew from the project last year amid cuts to its capital expenditure because of the Covid-19 pandemic.
The two Chinese companies set up a joint venture vehicle last December with a registered capital of 24.9bn yuan ($3.8bn)
The feasibility study for the project took several years to be approved, partly because of delays on the Saudi side, the source said. But Huajin is in the process of hiring at least 150 people this month and could complete construction of the project by the end of 2023, if work starts by December as planned. Start-up is likely to be in 2024.
Petrochemical focus
Oil product demand is slowing more quickly in northeast China than in southern China. This is likely to have prompted a change in the project's outlook, giving it a greater petrochemical focus than previously planned. But it will still potentially add to a local oil product supply glut.
The Panjin complex will comprise over 32 units including a 300,000 b/d refinery, 1.65mn t/yr of ethylene and 2mn t/yr of paraxylene (PX) capacity, requiring investment of Yn76bn. The previous plan envisaged a refinery of the same size, but with 1.5mn t/yr of ethylene and 1.3mn t/yr of PX capacity.
The project has support from the Liaoning government, which aims to turn its traditional refining bases into larger plants integrated with sophisticated petrochemical units. It is projected to generate revenue of Yn100bn/yr and Yn20bn/yr in tax revenue. The project is part of the government's national refining and petrochemical industrial plan and a separate plan for the revitalisation of China's northeast region that is endorsed by the state council.
Huajin will have an advantage over private-sector firm Hengli Petrochemical, also based in Liaoning, as its Zhenhua oil trading unit does not face the same crude import quota limits that Hengli does. Beijing awarded a smaller batch of quotas in its latest round, limiting some refiners' purchases.
The government has also continued to grant product export quotas to Norinco, including 150,000t awarded this month. But Huajin's new plant will likely require higher volumes to offset any product surpluses as it lacks a retail network and faces challenges if Beijing decides to continue to reduce export quotas. The government has already cut volumes for the second batch of product quotas released this month.
Huajin's existing 160,000 b/d plant in Panjin has been running at nameplate capacity but has been under maintenance since mid-July. The work is expected to end in early September, with product exports likely to resume in October. Huajin also operates a 500,000 t/yr naphtha cracker. The refinery has the capacity to produce over 60,000 b/d of diesel but does not produce gasoline as the refinery naphtha is used to feed the cracker. It also produces and sells asphalt, lubricants and urea.
Sincen was set up in 2011 and has over 18 subsidiaries, including in petrochemicals trading.
