rongsheng new refinery factory

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)

MOSCOW (MRC) -- With its name change from Total to TotalEnergies amid its transition from fossil fuels, the major oil company is investing more in renewables and energy storage while decreasing emissions from its natural gas business, reported S&P Globalwith reference to CEO Patrick Pouyanne"s statement Oct. 14.

"We want to decarbonize energy, so we need to invest largely in renewables and decarbonized energy," he said, adding that TotalEnergies plans to invest 75% of its capital expenditures in hydrocarbons and 25% in renewables and electricity, "which is quite new."

"We are building today a multi-energy company with oil and gas, but also renewables and electricity, and tomorrow hydrogen and other technologies," Pouyanne said.

And while it is better from a climate perspective to generate power from gas instead of coal, the challenge for gas usage is reducing methane emissions, he said. Gas-fired power plants are controllable assets that can ramp up and down, which helps deal with renewable energy intermittency, and although batteries can help, long-duration energy storage remains a difficult challenge, Pouyanne said.

TotalEnergies is a broad energy company that produces and markets energies on a global scale: oil and biofuels, natural gas and green gases, renewables, and electricity. The company rebranded itself from Total to TotalEnergies during Q2 2021. The French firm has announced allocating part of surplus revenues to share buybacks. Its 105,000 employees are committed to energy that is ever more affordable, clean, reliable and accessible to as many people as possible. Active in more than 130 countries, TotalEnergies puts sustainable development in all its dimensions at the heart of its projects and operations to contribute to the well-being of people.

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.

Financial Associated Press, January 12 - Rongsheng Petrochemical announced that the 40 million T / a refining and chemical integration project (phase II) of Zhejiang Petrochemical, a holding subsidiary, was fully put into operation. Up to now, the oil refining, aromatics, ethylene and downstream chemical products units in phase II of the project have been fully put into commissioning, and the whole process has been opened. The company will further improve the commissioning of relevant process parameters and improve the production and operation level.

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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.

Sultan Al Jaber, the UAE’s minister of state, who is also CEO of ADNOC, said the agreement has the potential to open new markets for its growing portfolio of products and attract investment to support our downstream and gas expansion plans.

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.

Saudi Aramco today signed three Memoranda of Understanding (MoUs) aimed at expanding its downstream presence in the Zhejiang province, one of the most developed regions in China. The company aims to acquire a 9% stake in Zhejiang Petrochemical’s 800,000 barrels per day integrated refinery and petrochemical complex, located in the city of Zhoushan.

The first agreement was signed with the Zhoushan government to acquire its 9% stake in the project. The second agreement was signed with Rongsheng Petrochemical, Juhua Group, and Tongkun Group, who are the other shareholders of Zhejiang Petrochemical. Saudi Aramco’s involvement in the project will come with a long-term crude supply agreement and the ability to utilize Zhejiang Petrochemical’s large crude oil storage facility to serve its customers in the Asian region.

Phase I of the project will include a newly built 400,000 barrels per day refinery with a 1.4 mmtpa ethylene cracker unit, and a 5.2 mmtpa Aromatics unit. Phase II will see a 400,000 barrels per day refinery expansion, which will include deeper chemical integration than Phase I.

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: 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.

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.

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.

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.

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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.

“As we continue to successfully deliver our 2030 smart growth strategy, we are committed to working with partners who enable us to unlock and maximize value and help us secure access to new centers of global demand.”

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.

Privately owned unaffiliated refineries, known as “teapots,”[3] mainly clustered in Shandong province, have been at the center of Beijing’s longtime struggle to rein in surplus refining capacity and, more recently, to cut carbon emissions. A year ago, Beijing launched its latest attempt to shutter outdated and inefficient teapots — an effort that coincides with the emergence of a new generation of independent players that are building and operating fully integrated mega-petrochemical complexes.[4]

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.

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]

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]

Last October, Beijing reduced crude oil import quotas awarded to small independent refineries for the first time since they were allowed into the market while raising them for larger, more efficient private plants. Among the primary beneficiaries of these new allocations are a new generation of provincial-backed independent players long interested in expanding into the oil refining business.[19]

The politics surrounding this new class of greenfield mega-refineries is important, as is their geographical distribution. Beijing’s reform strategy is focused on reducing the country’s petrochemical imports and growing its high value-added chemical business while capping crude processing capacity. The push by Beijing in this direction has been conducive to the development of privately-led mega refining and petrochemical projects, which local officials have welcomed and staunchly supported.[20]

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.

But with the start-up of advanced liquids-to-chemicals complexes in neighboring provinces, Shandong’s competitiveness has diminished.[23] And with pressure mounting to find new drivers for the provincial economy, Shandong officials have put in play a plan aimed at shuttering smaller capacity plants and thus clearing the way for a large-scale private sector-led refining and petrochemical complex on Yulong Island, whose construction is well underway.[24] They have also been developing compensation and worker relocation packages to cushion the impact of planned plant closures, while obtaining letters of guarantee from independent refiners pledging that they will neither resell their crude import quotas nor try to purchase such allocations.[25]

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.

Image: 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. Photo: courtesy of Abu Dhabi National Oil Company.

The Abu Dhabi National Oil Company (ADNOC) has entered into a framework agreement with China-based Rongsheng Petrochemical to look out for domestic and international expansion opportunities.

The deal will see ADNOC and Rongsheng explore opportunities in the sales of refined products from ADNOC to Rongsheng, downstream investment opportunities in both China and the UAE, and the supply and delivery of LNG to Rongsheng.

Under the terms of the agreement, both the companies will look out for opportunities to expand the volume and range of refined products sales to Rongsheng in addition to ADNOC’s participation as Rongsheng’s strategic partner in refinery and petrochemical opportunities, including funding in Rongsheng’s downstream complex.

On the other hand, the China-based company will also explore possible investments in ADNOC’s downstream industrial ecosystem in Ruwais, including the proposed Gasoline Aromatics Plant, GAP, and the possibility for ADNOC to supply and deliver LNG for utilisation by Rongsheng within its production factories in China.

UAE Minister of State and ADNOC Group CEO Al Jaber said: “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.

“As we continue to successfully deliver our 2030 smart growth strategy, we are committed to working with partners who enable us to unlock and maximize value and help us secure access to new centers of global demand.”

Rongsheng Group chairman Li Shuirong said: “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.”

With demand for transport fuels set to tail off in the years ahead, a new breed of processing plants is sprouting up across the region. These integrated refineries convert oil into petrochemicals, the building blocks for everything from food packaging to car interiors, and produce less fuels like gasoline.

In China, the biggest of these is Rongsheng Petrochemical Co.’s plant on Zhoushan island, near Ningbo. The 800,000 barrel-a-day operation opened in 2019 and will reach full capacity before year-end. An Indian Oil Corp.-led group is planning a gigantic 1.2 million barrels a day oil-to-chemicals complex on the country’s west coast. Saudi Aramco, as part of its strategy to invest downstream in Asia, has or plans to take a stake in both projects.

“It doesn’t make sense now to operate a standalone refinery or a standalone petrochemicals plant for that matter,” said Sushant Gupta, research director for Asia Pacific refining at WoodMac. Smaller facilities will find the new environment challenging, while there’s also a risk of over-capacity, he said.

The big new projects combined with low oil prices will potentially lead to refinery closures in developed markets over 2021 and 2022, Goldman Sachs Group Inc. said in a note last month. Some 1.2 million barrels a day of Chinese independent refining capacity will shut down over the next few years, while simpler plants in Japan and Australia will also be stressed, according to Gupta.

The new refineries will lead to a glut of capacity in China, according to Michal Meidan, the director of the China Energy Programme at the Oxford Institute for Energy Studies. This is partly due to the coronavirus damping global growth expectations and also as efforts to limit single-use plastics increase, she said.