Hengli has a quota to import about 400,000 barrels per day (b/d), the most of any independent refiner in China.  It has signed contracts with Sinochem to import crude and export fuels and will work with Sinopec, a domestic fuel marketing agent.

Hengli Group to begin testing $11 billion petrochemical complex and oil refinery next month

Next month, private chemical company Hengli Group will begin testing its $11 billion oil refinery and petrochemical complex located in northeastern China near the port of Dalian.

Once operational, the plant will produce gasoline and diesel along with plastics and other chemicals and cut the demand for imports.

While demand for diesel is expected to peak in China in 2020 and gasoline around 2025, demand for ethylene, a building block for plastics and polyesters, will grow to 26.8 million tonnes by 2020, up from 18.7 million tonnes in 2015, consultancy firm Globaldata told Reuters.

Hengli will not be the only petrochemical mega-complexes built in China in the near future.  There are plans to add a dozen such facilities along China’s east coast over the next five years.  According to Reuters, this is the biggest wave of expansion in China’s history and Hengli will be one of the largest facilities.

These new plants will be backed by Sinopec and Sinochem, Chinese state run oil companies, as well as private groups Shenghong Petrochemical and Wanhua Chemical and international companies Exxon Mobil and Germany’s BASF.

“Under a more liberalized policy, more independent and foreign companies will join the investment that will make China more self-sufficient in chemicals,” William Chen, chemicals analyst at IHS Markit told Reuters.

Hengli has a quota to import about 400,000 barrels per day (b/d), the most of any independent refiner in China.  It has signed contracts with Sinochem to import crude and export fuels and will work with Sinopec, a domestic fuel marketing agent.

The facility will also operate two 3.2 million tonnes-per-year residue hydrocracking units and three 3.2 million tonnes-per-year reforming units.  As well, it will have a 1.5 million tonnes-per-year ethylene unit and two 2.25 million tonnes-per-year paraxylene units.

“Integration gives us full flexibility to optimize output among oil, olefins and aromatics as and when that market is in favour,” Hengli’s spokesman Li Feng told Reuters. “It will be one of the industry’s most profitable plants.”

Steve Jenkins, a vice president at consultants Wood Mackenzie told Reuters that Hengli will also compete with north Asian rivals and will likely force them to cut their output.

Hengli will also be in competition with PetroChina’s 70-year old Dalian plant, which has roughly the same refining capacity has Hengli, but recent accidents, fires and spills in recent years have seen the refinery’s fortunes turn.

Dalian’s profit margins have been squeezed by a slowdown in fuel demand and rising competition from independent, or teapot, refineries.

“We’re caught in a dilemma. There is little space for us to upgrade, while the cost of relocating will be too huge to bear,” a Dalian plant manager told Reuters.