Singapore markets closed

Sinopec to launch $5.7 billion South China refinery in Q2 2020, seek Kuwaiti oil - sources

By Chen Aizhu and Shu Zhang
FILE PHOTO: Man stands next to a logo of Sinopec at an expo on rubber technology in Shanghai

By Chen Aizhu and Shu Zhang

SINGAPORE (Reuters) - China's Sinopec Corp is set to launch a new $5.7 billion refining and petrochemical complex in the south of the country in second-quarter 2020 using crude oil from Kuwait as a key feedstock, industry officials with knowledge of the matter said.

The project being developed by Asia's top refiner, a 200,000 barrels-per-day (bpd) plant in Zhanjiang, a coastal city in Guangdong province, will become the third greenfield refinery-petrochemical complex to be built in China within a space of two years.

Zhanjiang is Sinopec's <0386.HK> first major capacity addition since it launched a similar-sized Qingdao refinery on the east coast in 2009.

But the 40 billion yuan ($5.69 billion) complex comes on the heels of two privately invested mega-refineries - Hengli Petrochemical <600346.SS> and Zhejiang Petrochemical Corp - that have piled fresh capacity into an already oversupplied domestic fuel market, where transportation fuel demand has slowed while China's fuel exports have soared.

Sinopec is seeking to finalise a crude oil supply deal with Kuwait Petroleum Company (KPC) that will help boost Kuwait's oil sales to China to a record of nearly 600,000 bpd next year, the sources said. They declined to be identified because they were not authorized to talk to media.

Sinopec did not respond to a request for comment. Calls to KPC's headquarters outside regular business hours went unanswered.

The refinery is slated for start-up in April, followed by an ethylene plant in June next year, said one official briefed on the progress of the plant, located on Donghai island, Zhanjiang.

Some details of how the key production units could be configured appeared in a Sinopec social media blog posted earlier this week.

The project would include secondary units such as a residue fluid catalytic cracker (RFCC), a hydrocracker, a reformer and a diesel hydrotreater that are capable of producing low-sulphur fuels. It is integrated with a 800,000 tonne-per-year (tpy) naphtha cracker and other petrochemical units.

The Zhanjiang complex will come on line a few months after January's imposition of stricter global marine fuel emission rules, mandated by the International Maritime Organization (IMO).

"Timing is great for Zhanjiang's start-up, as it will be a major player in the 2020 IMO market and being a processor of heavy and medium crude oil it has its price advantages," said Harry Liu, downstream executive director with analysis firm IHS Markit.

Kuwaiti state media previously reported Kuwait, which supplied an average 440,000 bpd of crude oil to China in the first 9 months of this year according to China customs data, aims to raise China sales to 600,000 bpd next year.

A separate Beijing-based oil executive with knowledge of the discussions said most of that extra volume will go to Zhanjiang.

(Reporting by Chen Aizhu and Shu Zhang; Editing by Florence Tan and Kenneth Maxwell)