Guangzhou (JLC), March 15, 2019--Shandong Petrochemical Energy Group Co. (PEGC) will lead the Yantai-based Yulong refining and chemical project, according to Mr. Li Xiangping, president of Shandong Dongming Petrochemical and PEGC.

“It has been decided that Shandong will locate a refining and chemical project in Yantai’s Yulong Island and PEGC will take the lead, after inspections by the Shandong Refining and Chemical Association and the Department of Industry and Information Technology of Shandong Province,” Li said at an interview during the “two sessions” where he was a deputy to the People’s Congress earlier this month.

Previously Shandong expected Wanhua Chemical Group to head this refining and chemical project, but the government thought better of this idea after Wanhua said it focused on chemicals and didn’t know the refining industry very well, industry sources said. After discussions, it was decided that PEGC shall take the lead, but Wanhua Chemical and Nanshan Group may still participate in this project.

PEGC plans to get approval from the country’s National Development and Reform Commission for first-phase preparations for this project in the first half of 2019 and start construction in 2020, aiming to commission the new refinery in 2022, Li said.

Investment in this project will exceed 100 billion yuan ($14.89 billion) and loans will be a necessity, Li said, “PEGC has secured capital for this project and the Shandong Provincial Development and Reform Commission has offered great help.”

"With the phase-I refining capacity at 20 million mt/yr (400,000 bbl/day), the Yulong project will become the largest refining and chemical project in Shandong after it comes online. Based on the government-set ratio of new refining capacity to old capacity to be removed, which stands at 1: 1.25, the province will remove units with a total refining capacity of 25 million mt/yr after the new project comes on line. According to the province’s plan, cuts in independent refiners’ capacity will be carried out in three phases. First, the government will cut capacity at refiners with difficulties in business, those that are in the urban district and those outside the chemical industrial park, then it will remove units at refiners with no more than three million mt/yr of capacity and move on to refiners with no more than five million mt/yr of capacity.”

    Some deputies to the two Sessions said they were confident in the Yulong project, but the project is still subject to uncertainties and there are still prevailing doubts in the market. Great resistance will remain even if this project is taken over by PEGC, a joint venture established by Dongming Petrochemical and several Shandong-based independent refiners in September 2017. It may be more practicable for different cities to integrate local refiners as fewer parties will be involved in the integration, but seen from a higher level, it will be necessary for Shandong to muster all its strength to push forward with integration.

    JLC will pay close attention to progress in the project.

    For more details about the project, please see JLC’s news report titled “Can Wanhua join hands with independents in integration?”: http://en.315i.com/detail/special/237