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Shandong proceeds with removal of outdated refining capacity

JLC June 30 , 2020 Victor Yang

Guangzhou (JLC), June 28, 2020--Shandong has made a preliminary schedule for the removal of outdated refining capacity to make room for the new capacity of the Yulong refining-chemical project, to dismantle four refineries in 2020, according to refinery sources.


These four refineries are Kinshi Bitumen, Yuhuang Shengshi Chemical, Befar Binyang Fuel Chemical and Zhonghai Fine Chemical, with a total refining capacity of 12.70 million mt/yr (254,000 bbl/day).

Shandong began to dismantle the oil refining units at 60,000 bbl/day Kinshi Bitumen in May and plans to knock down units at Binyang Fuel Chemical as from the middle of July, with the latter scheduled to shut down its units in late June.


Zhonghai Fine Chemical may shut down in August and its quotas for 1.86 million mt of imported crude will be taken over by Yulong. It is already making preparation for the knockdown.


Yuhuang Shengshi Chemical, another company to be “integrated” into the Yulong project, plans to shut its CDUs in late August and then begin the knockdown.


Yuhuang Chemical, parent company of Yuhuang Shengshi Chemical, has gone into receivership because of debt crisis, according to industry sources.


These are just the first batch of oil refining units to be eliminated by Shandong as the province proceeds with its refining-chemical integration. A total of 10 independent refiners with a total refining capacity of 27.80 million mt (556,000 bbl/day) in Shandong have agreed to be “integrated” into the Yulong project, JLC’s data indicates. These refiners’ quotas for imported crude will be transferred to the Yulong project in Yantai.

Refiners to be removed will get government compensations which are tied to their refining capacity. They will get 800 yuan of compensations for every metri tonne of annual refining capacity and an extra 10% if they signed agreements in 2019 on unit removal.


Shandong had announced a plan in November 2018 to integrate its refining and chemical sectors, as part of its efforts to replace old economic growth drivers with new ones, improve the layout of the petrochemical industry, enhance its competitiveness and achieve green development. What the so-called integration actually means is the construction of large refining-chemical plants when small and outdated units are removed, like putting small refineries together to form a large one, except that these small ones will not exist any longer. The idea is that their refining capacity will be transformed to a large refinery, hence the term “integration”.


The Yulong project is Shandong’s first refining-chemical project under its integration plan, with 20 million mt/year (400,000 bbl/day) of refining capacity for phase I. Construction of this project is expected to begin in 2020.

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