rongsheng refinery china brands

SINGAPORE, Jun 2, 2022 (China Knowledge) – China’s leading chemical company Rongsheng Petrochemical (002493) has moved up two notches this year to rank the 8th place on Top 10 Most Valuable Chemicals Brands. It is the only Chinese chemical brand that placed in the global top list that include multinational companies like BASF, SABIC, LG Chem, Dow, Linde, LyondellBasel, Asahi Kasei, Mitsubishi Chemical and Shin-Etsu.

This latest Brand Finance Chemical 25 that published on May 31 also places China on the 4th place after Germany, U.S and Japan in terms of total brand value among the selected 25 chemical companies. The brand valuation company Brand Finance is a chartered accountancy firm regulated by the Institute of Chartered Accountants in England and Wales, and adopt internationally recognized standards on Brand Valuation – ISO 10668 and Brand Evaluation – ISO 20671.

With brand value worth US$2.3 bln, up 42.9% year on year, Rongsheng Petrochemical has become the most valuable Chinese brand in this year’s Chemical 25 ranking. Besides brand value, Brand Finance, also determines the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance. In accordance to Rongsheng Petrochemical’s evaluation, its brand’s strength index moved up from an A+ rating in 2021 to an AA- rating in 2022.

What differentiate Rongsheng Petrochemical with domestic and foreign peers is the company’s emphasis and commitment on sustainability and green development. For example, it purifies carbon dioxide in its refining-petrochemical integrated complex, and using it to produce downstream chemical products. Renewal energy and material wise it is currently the largest supplier of solar-grade EVA for the photovoltaic industry as well as the largest supplier of food grade recycled PET bottle flakes in China.

In addition to its brand value Rongsheng Holding as a group is also listed in the Fortune Global 500 in terms of sales revenue. Last year the Chinese giant, as a group, was placed 255th with USD 44.7 bln revenue achieved in 2020. The latest Fortune Global 500 in 2022 to be published next month is expected to elevate many placings due to its whopping increase in revenue last year.

Rongsheng Petrochemical (brand value up 43% to US$2.3 billion) achieved very strong growth this year, rising two places in the chemicals ranking and jumpingfrom 10th to 8th place amongst global chemicals brands. The Chinese brand owns various globally significant facilities, including an integrated refining-petrochemical complex with the refining capacity of 40 million tons per annum.

More broadly, the brand is likely to become the largest polycarbonates producer in China this year, and the brand is also the largest supplier of solar-grade EVA for the photovoltaic industry. This creates further opportunities to grow and develop its brand in coming years as demand for such products increases.

SINGAPORE, Oct 14 (Reuters) - Rongsheng Petrochemical, the trading arm of Chinese private refiner Zhejiang Petrochemical, has bought at least 5 million barrels of crude for delivery in December and January next year in preparation for starting a new crude unit by year-end, five trade sources said on Wednesday.

Rongsheng bought at least 3.5 million barrels of Upper Zakum crude from the United Arab Emirates and 1.5 million barrels of al-Shaheen crude from Qatar via a tender that closed on Tuesday, the sources said.

Rongsheng’s purchase helped absorbed some of the unsold supplies from last month as the company did not purchase any spot crude in past two months, the sources said.

Zhejiang Petrochemical plans to start trial runs at one of two new crude distillation units (CDUs) in the second phase of its refinery-petrochemical complex in east China’s Zhoushan by the end of this year, a company official told Reuters. Each CDU has a capacity of 200,000 barrels per day (bpd).

Zhejiang Petrochemical started up the first phase of its complex which includes a 400,000-bpd refinery and a 1.2 million tonne-per-year ethylene plant at the end of 2019. (Reporting by Florence Tan and Chen Aizhu, editing by Louise Heavens and Christian Schmollinger)

BEIJING, Aug 14 (Reuters) - Rongsheng Petrochemical , the listed arm of a major shareholder in one of China’s biggest private oil refineries, expects demand for energy and chemical products to return to normal in the country in the second half of this year.

Rongsheng expects to start trial operations of the second phase of the refining project, adding another 400,000 bpd of refining capacity and 1.4 million tonnes of ethylene production capacity in the fourth quarter of 2020.

“We expect the effects of the coronavirus pandemic on energy and chemicals to have basically faded in spite of the possibility of new waves of outbreak,” said Quan Weiying, board secretary of Rongsheng, in response to Reuters questions in an online briefing.

But Li Shuirong, president of Rongsheng, told the briefing that it was still in the process of applying for an export quota and would adjust production based on market demand. (Reporting by Muyu Xu and Chen Aizhu; Editing by Jacqueline Wong)

Abu Dhabi National Oil Company (ADNOC) has signed a broad framework agreement with China’s Rongsheng Petrochemical to explore domestic and international growth opportunities in support of ADNOC’s 2030 growth strategy.

The companies will examine opportunities in the sale of refined products from ADNOC to Rongsheng, downstream investment opportunities in both China and the United Arab Emirates (UAE) and the supply of liquified natural gas (LNG) to Rongsheng.

Under the terms of the deal, the companies will also study chances to increasing the volume and variety of refined product sales to Rongsheng as well as ADNOC’s participation as the China firm’s strategic partner in refinery and petrochemical projects. This could include an investment in Rongsheng’s downstream complex.

In return, Rongsheng will also look at investing in ADNOC’s downstream industrial ecosystem in Ruwais, UAE, including a proposed gasoline-to-aromatics plant as well as reviewing the potential for ADNOC to supply LNG to Rongsheng for use within its own complexes in China.

Rongsheng’s chairman Li Shuirong added that the cooperation will ensure that its project, which will have a refining capacity of up to 1 million bbl/day of crude oil, has adequate supplies of feedstock.

(Reuters) Chinese conglomerate Zhejiang Rongsheng Holding Group plans to double capacity of a joint venture refining project to 800 Mbpd in 2020, two years after the first phase starts up, senior company officials said Thursday.

The project, a venture among private companies led by Rongsheng, is planning to start up the 400 Mbpd first phase in 2018, aiming to meet the group"s requirements for petrochemical feedstocks.

Podcast: China"s petrochemical refiners are making their presence felt way beyond the country"s borders. How will this impact global supply, demand, and trade balances? Will global operating rates be reduced?

Textile giants Rongsheng and Hengli have shaken up China"s cozy, state-dominated oil market this year with the addition of close to 1mn b/d of new crude distillation capacity and vast, integrated downstream complexes. Petrochemical products, rather than conventional road fuels, are the driving force for this new breed of private sector refiner. And more are on their way.

Tom: Hello, and thank you very much for joining us for the latest in our series of podcasts, "China Connection." I"m Tom Reed, VP for China Crude and Products. I head our oil analysis and pricing for the Chinese market.

Tom: And today we are discussing the advent of petrochemical refineries in China, refineries that have been built to produce mainly petrochemical feedstocks. Just a bit of background here, these two big new private sector firms, Rongsheng and Hengli, have each opened massive, shiny new 400,000 b/d refineries in China this year. Hengli at Changxing in Northeast Dalian and Rongsheng at Zhoushan in Zhejiang Province on the East coast. For those unfamiliar with Chinese geography, Dalian is up by China"s land border with North Korea and Zhoushan is an island across the Hangzhou Bay from Shanghai. And the opening of these two massive new refineries by chemical companies is shaking up China"s downstream market. But China is a net exporter of the core refinery products, gasoline, diesel, and jet. So, building refineries doesn"t sound like a purely commercial decision. Is it political? What"s behind it? How will it affect the makeup of China"s petrochemical product imports?

Chuck: And clearly, the driver here for Rongsheng and Hengli, who as Tom mentioned, are chemical companies, they are the world"s largest producers of purified terephthalic acid, known as PTA, which is the main precursor to make polyester, polyester for clothing and PET bottles. And each of them were importing massive amounts of paraxylene, paraxylene being the main raw material to make PTA. And paraxylene comes from the refining of oil. And really the alternate value for paraxylene or its precursors would be to blend into gasoline to increase octane. So, when looking to take a step upstream in terms of reverse or vertical integration, they"ve quickly found themselves not just becoming paraxylene producers, but in fact becoming refiners of crude to begin with, which of course, is quite complex and it involves all kinds of co-products and byproducts. And as many know, the refining of oil, the primary driver there, as Tom has mentioned, is to produce motor fuels. So, we"re reversing this where the petrochemicals become the strategic product and we look to optimize or maybe even limit the amount of motor fuels produced.

So, just as an order of magnitude and to show the numbers aren"t so massive in terms of global PX demand or paraxylene demand. Back in 2010, the global demand for PX was around 30 million tons for the year, of which Chinese demand was about a third or 9.8 million tons. And then last year in 2018, global demand had increased to 43.5 million tons, but of which now China was consuming 25 million of those 43.5 million tons. So, you can see that China is consuming more than half of the global PX demand and yet their production or their capacity to produce PX was far below that. And as a result, China imported last year nearly 16 million tons of PX or about a third of the global production was actually shipped into China by producers who are in the Middle East or the primary sources are from Northeast Asia, Japan, Korea, Taiwan, and then Southeast Asia as well.

Chuck: And margins, of course, as well because no one wants to shut down their unit just to accommodate the new Chinese production. And what remains to be seen is global operating rates for these PX units will be reduced to maybe unsustainable levels. And as margins come down, they"ll be down for everyone, but the most efficient suppliers or producers will be the ones that survive. And in the case of Hengli and Rongsheng, low feedstock costs, if you"re driving down the cost of paraxylene, you take the benefit on the polyester side because now you have very competitive or very low-priced feedstock.

Tom: That"s a really interesting point actually. Looking at it from a refining economics point of view, if you were trying to diversify your revenue stream, for example, you probably wouldn"t want to increase your gasoline production. And gasoline margins in Europe are barely breaking even, they"re about $4 a barrel. In China, gasoline crack spreads are actually negative. So, fine, they"re self-sufficient in the paraxylene they need for weaving, but are they just... the refiners themselves, Hengli and Changxing, are they now just soaking up losses from the sales of their transport fuels? I think they may be initially, but they"re not just giving their gasoline away, obviously, these refineries were conceived as viable commercial concerns. Hengli anticipates profits, I think, of around 12 billion Yuan per year from its Changxing refinery giving a payback period on that investment of around five years. And each company, interestingly enough, has a distinct marketing strategy for their transport fuel.

Rongsheng is trying to build itself into a retail brand around Shanghai and the Zhejiang area. And Hengli is trying to muscle into the wholesale market on a national level, so it"s gonna be selling products across China. And in that respect, as we were discussing earlier, in fact, Rongsheng appears to have an advantage because where it"s located on the East Coast of China, that region is net short still of transport fuels, but Hengli in the Northeast, that"s a very competitive refining environment. It"s a latecomer to an already pretty saturated market: PetroChina, a state-owned oil giant, is a huge refiner up in Northeast China with its own oil fields, so a ready-made source of low-cost crude. And it"s also very close to the independent sector refining hub in Shandong Province, which is the largest concentration of refineries in China. So, I think there are definite challenges for them on the road fuel front, even if it sounds like they"re going to be pretty competitively placed further downstream in the paraxylene market.

Chuck: Well, and beyond paraxylene, they are looking at...to maximize paraxylene, not to get too technical, but you wanna split the naphtha into two different qualities and the high N+A, or the heavier naphtha is what yields the most paraxylene per ton of feed. But then you"re left with a lighter paraffinic naphtha, which is not particularly good to blend into gasoline. And so, therefore, both are building ethylene steam crackers using that naphtha and then taking the ethylene down into polyethylene plastics. Not strategic markets for these two players necessarily, but China also has massive deficits in terms of meeting its domestic polyethylene demand. China is the largest importer of polyethylene and polypropylene. So, these projects will help offset some of that as well. But I"m concerned, you mentioned about the road fuels and if they are making retail gasoline, one needs octane, and it"s precisely the precursors to the paraxylene that are needed, you have to buy those away from the chemical sector in order to blend up to the appropriate octane level. Is there a chance that they might be able to export fuels products or is that left to maybe some of the other established refining players in China?

Tom: Well, that"s one of the peculiarities of the Chinese market. As private sector companies, neither Rongsheng nor Hengli are allowed currently to export transport fuels. That"s a legacy concern of the Chinese government to ensure energy self-sufficiency downstream to make sure there"s adequate supply on the domestic market of those fuels. So, that is a real impediment for them. And when they ramp up production of gasoline, diesel, and jet, they are driving down domestic prices and they are essentially forcing product into the seaborne market produced by other refineries. So, in that respect, the emergence of Hengli in Northeast China on PetroChina"s doorstep has created a huge new sense of competition for PetroChina in particular. And I think certainly when you look at their recent financial data, it"s quite clear that they are struggling to adapt to the new environment in which it"s essentially export or die, because these new, massive refineries are crushing margins inside China.

I think globally it"s increasingly a competitive environment for road fuels. China is already a net exporter of over 1mn b/d combined of gasoline, diesel, and jet. It"s the fastest-growing exporter of those fuels in the world. But over-supply is also percolating through into the seaborne market: Indian diesel exports are rising; everyone is trying to desperately seek out net short regions and they"re having to ship product further and further overseas. And we"re seeing a situation emerge now in China where these refineries are importing crude perhaps from Latin America and they"re exporting finished products to those same markets from which they took the crude. It"s a tricky arbitrage, one would imagine.

Chuck: And going back specifically to the Hengli and Rongsheng projects, it"s interesting to note, again, going to an order of magnitude or perspective, Hengli is producing or has capacity to produce 4.5 million tons of paraxylene. And in phase one, Rongsheng will have capacity to produce 4 million tons. And I know those are just large numbers, but again, bear in mind that last year, global demand was 43.5 million. So, effectively, these two plants, they could account for 20% of global demand. Just these two projects themselves to give you an idea of just how massive they are and how impactful they can be. Impactful or disruptive, it remains to be seen.

Tom: A sign it doesn"t do things by halves. Although that said, one of the interesting things they have done is essentially halved their transport fuel yields. So, where in a conventional refinery, your combined output of gasoline, diesel, and jet, those core products, might be in the region of 80%, when you look at these new refineries, they"ve really cut that back down to 40% or 50%. And there are new petrochemical refineries springing up, and it"ll be very interesting to see how disruptive those are to the petrochemical market. But in the conventional refining market, they are, I think under pressure to do even more to reduce their exposure to already weakened gasoline and diesel markets. I mean, Shenghong — this new textile company who"s starting up another massive new conventional refinery designed to produce petrochemical products in 2021, I think — they"ve managed to reduce that combined yield to around 30%. They"ve reduced that from an original blueprint.

Chuck: It"s remarkable, but just a note of caution, there have been other petrochemical and refinery projects built recently in Saudi Arabia and in Malaysia, in particular, with established engineering and established chemical and refining companies. And they"ve had trouble meeting the targeted dates for startup and it"s one thing to be mechanically complete, it"s another thing to be operationally complete. But both Hengli and Rongsheng have amazed me at how fast they were able to complete these projects. And by all reports so far, they are producing very, very effectively, but it does remain to be seen why these particular projects are able to run whereas the Aramco projects in Malaysia and in Rabigh in Saudi Arabia have had much greater problems.

Tom: It sounds like in terms of their paraxylene production, they are going to be among the most competitive in the world. They have these strategies to cope with oversupplied markets and refined fuels, but there is certainly an element of political support which has enabled them to get ahead of the pack, I guess. And suddenly in China, Prime Minister Li Keqiang visited the Hengli plant shortly after it came on stream in July, and Zhejiang, the local government there is a staunch backer of Rongsheng"s project. And Zhoushan is the site of a national government initiative creating oil trading and logistics hub. Beijing wants Zhoushan to overtake Singapore as a bunkering location and it"s one of the INE crude futures exchanges, registered storage location. So, both of these locations in China do enjoy a lot of political support, and there are benefits to that which I think do allow them to whittle down the lead times for these mega projects.

So, thank you for joining us today, and it"ll be interesting to follow all of these developments because there still are so many moving parts. And you can follow this on the petroleum side with China Petroleum, the publication in which Tom edits out of London or some of our petrochemical reports. We do daily assessments on the paraxylene markets as well as monthly outlooks, which include global price forecasts. And we have databases which show supply, demand, and trade flows, etc. And then also please tune in for future episodes of the "China Connection." And we thank you for your time and attention.

China"s private refiner Zhejiang Petroleum & Chemical is set to start trial runs at its second 200,000 b/d crude distillation unit at the 400,000 b/d phase 2 refinery by the end of March, a source with close knowledge about the matter told S&P Global Platts March 9.

ZPC cracked 23 million mt of crude in 2020, according the the source. Platts data showed that the utilization rate of its phase 1 refinery hit as high as 130% in a few months last year.

Started construction in the second half of 2019, units of the Yuan 82.9 billion ($12.74 billion) phase 2 refinery almost mirror those in phase 1, which has two CDUs of 200,000 b/d each. But phase 1 has one 1.4 million mt/year ethylene unit while phase 2 plans to double the capacity with two ethylene units.

With the entire phase 2 project online, ZPC expects to lift its combined petrochemicals product yield to 71% from 65% for the phase 1 refinery, according to the source.

ZPC has the widest flexibility on both crude slate and product slate as the newest integrated complex in China, which enables it to adjust production plans promptly in line with market changes, he said.

Zhejiang Petroleum, a joint venture between ZPC"s parent company Rongsheng Petrochemical and Zhejiang Energy Group, planned to build 700 gas stations in Zhejiang province by end-2022 as domestic retail outlets of ZPC.

Established in 2015, ZPC is a JV between textile companies Rongsheng Petrochemical, which owns 51%, Tongkun Group, at 20%, as well as chemicals company Juhua Group, also 20%. The rest 9% stake was reported to have transferred to Saudi Aramco from the Zhejiang provincial government. But there has been no update since the agreement was signed in October 2018.

China"s crude throughput rose 4.6% year on year to 14.13 million b/d in 2021 despite refineries cutting crude runs by 2.1% in December to offset product inventory pressure, National Bureau of Statistics data released Jan. 17 showed.

Meanwhile, feedstock consumption at China"s independent refineries in eastern Shandong province fell a marginal 0.4% year on year to 121.3 million mt in 2021, data from local information provider JLC showed. However, crude feedstock consumption fell 4.6% to 111.53 million mt over the same period as fewer crude import quotas were allocated to Shandong"s independent refineries in 2021, with four receiving no allocation in the last batch announced in mid-October. To address the feedstock shortage, fuel oil and bitumen blend were imported and cracked as supplement feedstocks in 2021, with 8.5 million mt cracked by Shandong independent refineries in the year, surging from a small volume the year before.

The integrated Zhejiang Petroleum & Chemical refinery continued to raise its crude throughput to around 2.84 million mt in December, up 7.2% from 1.72 million mt in November, which was up 54% from October, according to JLC data. The refinery ramped up throughput after it was allocated more quotas in late October.

The Hengli Petrochemical (Dalian) Refinery in Liaoning province also raised its throughput by 3.6% month on month to 1.7 million mt in December. This comes after the completion of the maintenance at its secondary units, according to refinery sources.

However, Shandong independent refineries have gradually started to cut crude throughput from around Jan. 22 in response to a directive to cap utilization below 70% during the Winter Olympics, as Beijing aims to ensure that emissions remain under control, refinery sources told S&P Global Platts. But some refinery sources believe the overall impact will not be much more than what occurs every year since the Winter Olympics will be held around the Lunar New Year holidays, when independent refineries are forced to cut crude throughput due to logistics and manpower constraints.

In other news, Sinopec"s Hainan Petrochemical refinery in southern China is expected to export about 50,000 mt of refined oil products in January 2022, according to a refinery source. This was down 55% from 110,000 mt planned for export in December 2021.

PetroChina"s West Pacific Petrochemical Corp. refinery will skip gasoil exports in January after skipping them in December and November due to good demand in the domestic market.

PetroChina"s flagship refinery Dalian Petrochemical in northeastern Liaoning province will raise its gasoline exports to 160,000 mt in January, according to sources with knowledge of the matter. This will be about 357% higher than its planned exports in December. Dalian will double jet fuel exports to 80,000 mt in January, from 40,000 mt last month. Dalian plans to process around 1.3 million mt of crudes in January, translating to 75% of its nameplate capacity, stable on the month.

** Sinochem has been in the process of starting up its 12 million mt/year CDU and related refining units at its Quanzhou Petrochemical facility in southern Fujian province, according to a source with knowledge of the matter Jan. 19. The refining and petrochemical units were shut at around Dec. 1, 2021 for maintenance, which lasted for about 40-50 days, according to the maintenance schedule. The refinery will likely process about 450,000 mt to 500,000 mt of crudes for the remainder of February, compared with around 1.2 million mt during normal months.

** Sinopec"s Fujian Refining and Chemical Co. refinery in southeastern Fujian province has been in the process of restarting from a scheduled maintenance this week, according to a source with knowledge of the matter Jan. 19. The refinery was expected to return to normal operations around Jan. 20, about nine days behind schedule, mainly due to the slow progress in procuring some parts, the source added. The 4 million mt/year crude distillation unit, as well as some secondary units, including the aromatics units, were to be restarted along the way. Following the restart of the CDU, the crude throughput at the refinery will likely increase to around 750,000 mt in January, or 63% of its nameplate capacity. This compares with a run rate of 56%, or 660,000 mt, in December 2021.

** Japan"s ENEOS said Dec. 28 it plans to shut the sole crude distillation unit at its Marifu refinery in the west in late January for scheduled maintenance until early March 2022.

** Idemitsu Kosan restarted the sole 160,000 b/d crude distillation unit at its Aichi refinery in central Japan on Dec. 5 after completing planned maintenance, a spokesperson said Dec. 20.

** PetroChina"s Yunnan Petrochemical refinery in southwestern Yunnan province, has shut its 4 million mt/year residual hydrogenation unit and some of its relative downstream facilities due to a blast. The blast hit the residual hydrogenation unit Dec. 13 morning, according to a press release issued by the Anning city local government in Yuannan. A refining engineer said the closure of residual hydrogenation unit would cut about 30% of the refinery"s daily production.

** Sinopec"s Hainan Petrochemical refinery in southern China plans to completely shut for scheduled maintenance over March-April 2022, a source with the refinery said. This is a routine maintenance that is normally carried out by Chinese refineries every three to four years, according to the source. Sinopec Hainan refinery last carried out complete maintenance over November 2017-January 2018.

** Japan"s ENEOS said it will decommission the 120,000 b/d No. 1 CDU at its 270,000 b/d Negishi refinery in Tokyo Bay in October 2022. It will also decommission secondary units attached to the No. 1 CDU, including a vacuum distillation unit and fluid catalytic cracker. ENEOS will also decommission a 270,000 mt/year lubricant output unit at the Negishi refinery.

** Sinopec is looking to launch its 2 million mt/year crude distillation unit expansion at Luoyang Petrochemical in central China in January, with a new crude pipeline able to supply sufficient feedstock, a refinery source said late December. "We have reconfigured an existing crude pre-treater into a 2 million mt/year CDU to increase the primary capacity to 10 million mt/year. The start-up will be in the next month with the crude pipeline having been put into use in November," the refinery source said. The expansion was initially set to be put into use in H2 2020, but was delayed to H1 2021 due to construction of the 10 million mt/year Rizhao-Puyang-Luoyang crude pipeline and weak demand in oil product market, Platts reported. The source said the expansion needs more crude supplies discharged from Rizhao port in Shandong province and transmitted through the Rizhao-Puyang-Luoyang crude pipeline.

** Chinese Sinopec"s refinery Zhenhai Refining and Chemical currently has a 27 million mt/year refining capacity and a 2.2 million mt/year ethylene plant, after its phase 1 expansion project of 4 million mt/year crude distillation unit and a 1.2 million mt/year ethylene unit was delivered end-June.

** PetroChina"s Guangxi Petrochemical in southern Guangxi province plans to start construction at its upgrading projects at the end of 2021, with the works set to take 36 months. The projects include upgrading the existing refining units as well as setting up new petrochemical facilities, which will turn the refinery into a refining and petrochemical complex. The project will focus on upgrading two existing units: the 2.2 million mt/year wax oil hydrocracker and the 2.4 million mt/year gasoil hydrogenation refining unit. For the petrochemicals part, around 11 main units will be constructed, which include a 1.2 million mt/year ethylene cracker.

** Axens said its Paramax technology has been selected by state-owned China National Offshore Oil Corp. for the petrochemical expansion at the plant. The project aims at increasing the high-purity aromatics production capacity to 3 million mt/year. The new aromatics complex will produce 1.5 million mt/year of paraxylene in a single train.

** China"s privately held refining complex, Shenghong Petrochemical, is likely to start feeding crudes into its newly built 16 million mt/year crude distillation unit, according to a company source in early January. The refinery initially planned to start up at the end of August, but this was postponed to the end of December due to slower-than-expected construction work, and then again to around the Lunar New Year. The construction of the complex started in December 2018. Located in the coastal city of Lianyungang in Jiangsu province, the company"s 16 million mt/year CDU is the country"s single biggest by capacity.

** Chinese privately owned refining and petrochemical complex Zhejiang Petroleum & Chemical has fully started up commercial operation at it 400,000 b/d Phase 2 refining and petrochemical project, parent company Rongsheng Petrochemical said in a document Jan. 12. There are two crude distillation units in the Phase 2 project, each with a capacity of 200,000 b/d. ZPC started trial run at one of the CDUs in November 2020. Due to tight feedstock supplies, the refiner could not feed the other CDU until the end of November 2021, when it gained crude import quota for the project. The nameplate capacity of the company doubled to 800,000 b/d in Phase 2. It will run four CDUs at about 82% of nameplate capacity in January. Rongsheng said Phase 2 adds 6.6 million mt/year aromatics and 1.4 million mt/year ethylene production capacity.

** Saudi Aramco continues to pursue and develop the integrated refining and petrochemical complex in China with Norinco Group and Panjin Sinchen. The joint venture plans to build an integrated refining and petrochemical complex in northeast China"s Liaoning province Panjin city with a 300,000 b/d refinery, 1.5 million mt/year ethylene cracker and a 1.3 million mt/year PX unit.

** Honeywell said China"s Shandong Yulong Petrochemical will use "advanced platforming and aromatics technologies" from Honeywell UOP at its integrated petrochemical complex. The complex will include a UOP naphtha Unionfining unit, CCR Platforming technology to convert naphtha into high-octane gasoline and aromatics, Isomar isomerization technology. When completed Yulong plans to produce 3 million mt/yr of mixed aromatics. Shandong"s independent greenfield refining complex, Yulong Petrochemical announced the start of construction work at Yulong Island in Yantai city at the end of October 2020.

** PetroChina officially started construction works at its greenfield 20 million mt/year Guangdong petrochemical refinery in the southern Guangdong province on Dec. 5, 2018.

** China"s coal chemical producer Xuyang Group has announced plans to build a greenfield 15 million mt/year refining and petrochemical complex in Tangshang in central Hebei province.

This year, China is expected to overtake the United States as the world’s largest oil refining country.[1] Although China’s bloated and fragmented crude oil refining sector has undergone major changes over the past decade, it remains saddled with overcapacity.[2]

The changing roles played by China’s independent refineries are reflected in their relations with Middle East suppliers. In the battle to ensure their profitability and very survival, smaller Chinese teapots have adopted various measures, including sopping up steeply discounted oil from Iran. Meanwhile, Middle East suppliers, notably Saudi Aramco, are seeking to lock in Chinese crude demand while pursuing new opportunities for further investments in integrated downstream projects led by both private and state-owned companies.

China’s “teapot” refineries[5] play a significant role in refining oil and account for a fifth of Chinese crude imports.[6] Historically, teapots conducted most of their business with China’s major state-owned companies, buying crude oil from and selling much of their output to them after processing it into gasoline and diesel. Though operating in the shadows of China’s giant national oil companies (NOCs),[7] teapots served as valuable swing producers — their surplus capacity called on in times of tight markets.

Yet, the Chinese government has spent the better part of two decades trying to consolidate the country’s sprawling independent refining sector by starving private operators of access to imported crude oil and targeting the smallest, least efficient plants for closure.[8] In 2011, China’s National Development and Reform Commission (NDRC) issued guidelines to eliminate small refineries to achieve economies of scale and improve efficiencies. Nevertheless, policies meant to discourage activity had the opposite effect, as most of the units that were earmarked for suspension expanded to stay open.[9]

Four years later, the NDRC adopted a different approach, awarding licenses and quotas to teapot refiners to import crude oil and granting approval to export refined products in exchange for reducing excess capacity, either upgrading or removing outdated facilities, and building oil storage facilities.[10] But this partial liberalization of the refining sector did not go exactly according to plan. Swelling with new sources of feedstock that catapulted China into the position of the world’s largest oil importer, teapots increased their production of refined fuels and, benefiting from greater processing flexibility and low labor costs undercut larger state rivals and doubled their market share.[11]

Meanwhile, as teapots expanded their operations, they took on massive debt, flouted environmental rules, and exploited taxation loopholes.[12] Of the refineries that managed to meet targets to cut capacity, some did so by double counting or reporting reductions in units that had been idled.[13] And when, reversing course, Beijing revoked the export quotas allotted to teapots and mandated that products be sold via state-owned companies, it trapped their output in China, contributing to the domestic fuel glut.

2021 marked the start of the central government’s latest effort to consolidate and tighten supervision over the refining sector and to cap China’s overall refining capacity.[14] Besides imposing a hefty tax on imports of blending fuels, Beijing has instituted stricter tax and environmental enforcement[15] measures including: performing refinery audits and inspections;[16] conducting investigations of alleged irregular activities such as tax evasion and illegal resale of crude oil imports;[17] and imposing tighter quotas for oil product exports as China’s decarbonization efforts advance.[18]

Yet, of the three most recent major additions to China’s greenfield refinery landscape, none are in Shandong province, home to a little over half the country’s independent refining capacity. Hengli’s Changxing integrated petrochemical complex is situated in Liaoning, Zhejiang’s (ZPC) Zhoushan facility in Zhejiang, and Shenghong’s Lianyungang plant in Jiangsu.[21]

As China’s independent oil refining hub, Shandong is the bellwether for the rationalization of the country’s refinery sector. Over the years, Shandong’s teapots benefited from favorable policies such as access to cheap land and support from a local government that grew reliant on the industry for jobs and contributions to economic growth.[22] For this reason, Shandong officials had resisted strictly implementing Beijing’s directives to cull teapot refiners and turned a blind eye to practices that ensured their survival.

To be sure, the number of Shandong’s independent refiners is shrinking and their composition within the province and across the country is changing — with some smaller-scale units facing closure and others (e.g., Shandong Haike Group, Shandong Shouguang Luqing Petrochemical Corp, and Shandong Chambroad Group) pursuing efforts to diversify their sources of revenue by moving up the value chain. But make no mistake: China’s teapots still account for a third of China’s total refining capacity and a fifth of the country’s crude oil imports. They continue to employ creative defensive measures in the face of government and market pressures, have partnered with state-owned companies, and are deeply integrated with crucial industries downstream.[26] They are consummate survivors in a key sector that continues to evolve — and they remain too important to be driven out of the domestic market or allowed to fail.

The changing structure and dynamics of China’s refining sector, specifically with respect to Chinese teapots, has impacted energy relations with Middle East producers. Indeed, Chinese teapot refiners, which just a few years ago arose as attractive crude oil spot market targets, have lately emerged as outlets for longer-term crude exports from the region.

In 2016, during the period of frenzied post-licensing crude oil importing by Chinese independents, Saudi Arabia began targeting teapots on the spot market, as did Kuwait. Iran also joined the fray, with the National Iranian Oil Company (NIOC) operating through an independent trader Trafigura to sell cargoes to Chinese independents.[27] Since then, the coming online of major new greenfield refineries such as Rongsheng ZPC and Hengli Changxing, and Shenghong, which are designed to operate using medium-sour crude, have led Middle East producers to pursue long-term supply contracts with private Chinese refiners. In 2021, the combined share of crude shipments from Saudi Arabia, UAE, Oman, and Kuwait to China’s independent refiners accounted for 32.5%, an increase of more than 8% over the previous year.[28] This is a trend that Beijing seems intent on supporting, as some bigger, more sophisticated private refiners whose business strategy aligns with President Xi’s vision have started to receive tax benefits or permissions to import larger volumes of crude directly from major producers such as Saudi Arabia.[29]

The shift in Saudi Aramco’s market strategy to focus on customer diversification has paid off in the form of valuable supply relationships with Chinese independents. And Aramco’s efforts to expand its presence in the Chinese refining market and lock in demand have dovetailed neatly with the development of China’s new greenfield refineries.[30] Over the past several years, Aramco has collaborated with both state-owned and independent refiners to develop integrated liquids-to-chemicals complexes in China. In 2018, following on the heels of an oil supply agreement, Aramco purchased a 9% stake in ZPC’s Zhoushan integrated refinery. In March of this year, Saudi Aramco and its joint venture partners, NORINCO Group and Panjin Sincen, made a final investment decision (FID) to develop a major liquids-to-chemicals facility in northeast China.[31] Also in March, Aramco and state-owned Sinopec agreed to conduct a feasibility study aimed at assessing capacity expansion of the Fujian Refining and Petrochemical Co. Ltd.’s integrated refining and chemical production complex.[32]

Commenting on the rationale for these undertakings, Mohammed Al Qahtani, Aramco’s Senior Vice-President of Downstream, stated: “China is a cornerstone of our downstream expansion strategy in Asia and an increasingly significant driver of global chemical demand.”[33] But what Al Qahtani did notsay is that the ties forged between Aramco and Chinese leading teapots (e.g., Shandong Chambroad Petrochemicals) and new liquids-to-chemicals complexes have been instrumental in Saudi Arabia regaining its position as China’s top crude oil supplier in the battle for market share with Russia.[34] Just a few short years ago, independents’ crude purchases had helped Russia gain market share at the expense of Saudi Arabia, accelerating the two exporters’ diverging fortunes in China. In fact, between 2010 and 2015, independent refiners’ imports of Eastern Siberia Pacific Ocean (ESPO) blend accounted for 92% of the growth in Russian crude deliveries to China.[35] But since then, China’s new generation of independents have played a significant role in Saudi Arabia clawing back market share and, with Beijing’s assent, have fortified their supply relationship with the Kingdom.

Meanwhile, though, enticed by discounted prices Chinese independents in Shandong province have continued to scoop up sanctioned Iranian oil, especially as their domestic refining margins have thinned due to tight regulatory scrutiny. In fact, throughout the period in which Iran has been under nuclear-related sanctions, Chinese teapots have been a key outlet for Iranian oil, which they reportedly unload from reflagged vessels representing themselves as selling oil from Oman and Malaysia.[38] China Concord Petroleum Company (CCPC), a Chinese logistics firm, remained a pivotal player in the supply of sanctioned oil from Iran, even after it was blacklisted by Washington in 2019.[39] Although Chinese state refiners shun Iranian oil, at least publicly, because of US sanctions, private refiners have never stopped buying Iranian crude.[40] And in recent months, teapots have been at the forefront of the Chinese surge in crude oil imports from Iran.[41]

China’s small-scale, inefficient “first generation” teapot refiners have come under mounting market pressure, as well as closer government scrutiny and tightened regulation. Though some have already been shuttered and others face imminent closure, dozens of China’s teapots, concentrated mainly in Shandong province, continue to operate thanks to the creative defensive measures they have employed and the important role they play in local economies.

Vertical integration along the value chain has become a global trend in the petrochemical industry, specifically in refining and chemical operations. China’s drive to self-sufficiency in chemicals is a key factor powering this worldwide trend.[42] And it is the emergent “second generation” of independent refiners that it is helping make China the frontrunner in developing massive liquids-to-chemicals complexes. Following Beijing’s lead, Shandong officials appear determined to follow this trend rather than risk being left in its wake.

Abu Dhabi, UAE – November 12, 2019: The Abu Dhabi National Oil Company (ADNOC) announced, today, it has signed a broad Framework Agreement with China’s Rongsheng Petrochemical Co., Ltd. (Rongsheng) to explore domestic and international growth opportunities which will support the delivery of its 2030 smart growth strategy.

The agreement will see both companies explore opportunities in the sale of refined products from ADNOC to Rongsheng, downstream investment opportunities in both China and the United Arab Emirates, and the supply and delivery of liquified natural gas (LNG) to Rongsheng.

The agreement was signed by His Excellency Dr. Sultan Al Jaber, UAE Minister of State and ADNOC Group CEO, and Li Shuirong, Chairman of Rongsheng Group.

H.E. Dr. Al Jaber said: “This Framework Agreement builds on the existing crude oil supply relationship between ADNOC and Rongsheng, which we are keen to enhance. The agreement covers domestic and international growth opportunities across a range of sectors, which have the potential to open new markets for our growing portfolio of products and attract investment to support our downstream and gas expansion plans.

Under the terms of the Framework Agreement, ADNOC and Rongsheng will explore opportunities for increasing the volume and variety of refined products sales to Rongsheng as well as ADNOC’s active participation as Rongsheng’s strategic partner in refinery and petrochemical opportunities, including an investment in Rongsheng’s downstream complex. In return Rongsheng will also explore potential investments in ADNOC’s downstream industrial ecosystem in Ruwais, including the proposed Gasoline Aromatics Plant (GAP) and the potential for ADNOC to supply and deliver liquified natural gas (LNG) for utilization by Rongsheng within its production complexes in China.

Shuirong said: “This Framework Agreement is a key milestone in Rongsheng Petrochemical’s strategic international expansion. ADNOC is an important trading partner, and we are confident of the win-win benefits of this partnership, particularly in realizing opportunities in the downstream space in Asia.

“The strategic cooperation with ADNOC will ensure that our ZPC project, which will have a refining capacity of up to 1 million barrels per day (mbpd) of crude, has adequate supplies of feedstock. Our valued partnership will enable Rongsheng Petrochemical to continue its expansion into the international oil market and we are confident Rongsheng Petrochemical will achieve enhanced market share and recognition in the global marketplace.”

Rongsheng Petrochemical Co., Ltd. is one of the leading companies in China’s petrochemical and textile industry. In recent years, Rongsheng has been committed to developing both vertically and horizontally across the value chain, investing massively in multiple high-value oil and gas projects. Amongst them, Zhejiang Petroleum & Chemical Co., Ltd. (ZPC), in which Rongsheng has a controlling interest, is a 40 million tons per annum mega integrated refining and chemical project. Once operational, ZPC will be one of the largest-scale plants in the world.

China is the world"s second-largest oil consumer, and Chinese energy companies have steadily increased their participation in ADNOC’s Upstream and Downstream operations. At the same time, ADNOC has identified China as an important growth market for its crude oil and petrochemical products, as it moves towards boosting its oil production capacity to 4 million barrels per day (mbpd) by the end of 2020 and 5mbpd in 2030 and accelerates the implementation of its downstream expansion and international investment strategies.

Zhejiang Petrochemical operates the Dayushan Island refinery, which is located in Zhejiang, China. It is an integrated refinery owned by Zhejiang Rongsheng Holding Group, Tongkun Group, Jihua Group, and others. The refinery, which started operations in 2019, has an NCI of 12.06.

Information on the refinery is sourced from GlobalData’s refinery database that provides detailed information on all active and upcoming, crude oil refineries and heavy oil upgraders globally. Not all companies mentioned in the article may be currently existing due to their merger or acquisition or business closure.