As early as 2013, China set the seven largest petrochemical industrial bases, then the Jiangsu Province Petrochemical Industry Planning and Layout Program "was released in March 2016, pointing out that Lianyungang Xuwei will be constructed as a world-class petrochemical industrial base. After a series of investigation and assessments the development planning was approved, marking that a new large scale petrochemical industrial base will start up, coupled with other refining & chemical projects that will be built or under construction in the next few years, China’ refining & chemical integration is further developed.  

    According to the plan, two sets of refining and chemical integrated projects will be built in the Phase-I (2017-2025) project. One includes one set of 16 million mt/yr refining unit, 1.1 million mt/yr ethylene unit and 2.8 million mt/yr PX unit. Another one consists of 15 million/yr refining unit and 1 million mt/yr PX unit. Ministry of Environmental Protection has approved Shenghong Petrochemical’s 16 million mt/yr refining & chemical integrated project, so Lianyungang project will get official approval in the next half year if there is no accident.

And the Phase-II (2016-2030) project will expand the 15 million mt/yr project, with a 10 millon mt/yr refining and 1 million mt/yr ethylene unit added.

    Shenghong Petrochemical will build up the project first, become another large scale private refining & chemical enterprises after Dalian Hengli Petrochemical and Zhejiang Petrochemical. In addition, JLC learned that Hebei Xinhua Lianhe and Hebei Yihong Petrochemical are also applying the construction of refining and chemical projects. If these applications were approved, Shandong teapots will face great pressure and their outflow of oil product will be suppressed obviously. In addition, Shandong teapots got no advantage in the competition as their refining capability is relatively weak and their composition of industrial chain was not that perfect. Of course, Shandong teapots also know about this trend, so they are strengthening the construction of the secondary plants to prolong their own industrial chains. And many teapots began to seek opportunities from SoEs in order to expand development.

    According to JLC, during the 13th Five-Year Plan, there are over 1000 million refining units are planned to be put into production. In 2017, Petrochina’s Yunnan Refinery began the operation successfully and will have oil product output by the thid quarter. Phase-II project of CNOOC’s Huizhou Refinery will also start the operation and the oil product will be put in the market gradually in 2017. That means China oil product supply will continue to increase in 2017 and the supply and demand contradiction will be severer. In next few years, the supply-demand contradiction will became sharper and the oil product export will be further pushed when domestic demand meet its bottleneck.

    China’s current refining pattern will be reshuffled after the constructions of the petrochemical industrial bases are continuously promoted. Therefore, those companies with backward units or small scale have to reform or shut down. Under such severer supply-demand contradiction of oil product, how to balance domestic market pattern will become an important issue in the future. A new pattern of refining & chemical integration project is forming, China oil product will undergo a great change facing with opportunities and challenges.