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10 million tons of crude oil import index finalized
China National Chemical Industry Group, a state-owned enterprise, has nine refineries with a combined annual crude oil processing capacity of 25 million tons. Six of these facilities are located in Shandong, and the three largest among them are Huaxing Petrochemical, Changyi Petrochemical, and Zhenghe Petrochemical, with capacities of 8.5 million, 8 million, and 6.5 million tons per year, respectively.
Despite being a central state-owned company, the group’s Shandong-based refineries face similar challenges to those of private competitors, particularly in terms of raw material shortages throughout the year. According to Chen Ching, an analyst at Zhuo Chuang, the Shandong refinery operated at only 40% capacity last year. The recent allocation of a 10-million-ton crude oil import quota is expected to significantly ease the pressure on raw material supply for the group's refining operations.
The increased access to crude oil is also expected to improve profitability, as crude oil typically yields higher economic returns compared to fuel oil. This new import volume will allow the refineries to not only meet their operational needs but also potentially reduce losses.
Previously, China National Chemical relied heavily on CNOOC for its raw materials. In 2012, the company purchased over 7 million tons of marine oil and imported fuel oil from CNOOC, which was sold at a ratio of 1:0.75. Additionally, the group sourced a significant amount of South American heavy crude oil from the spot market, accounting for 15–20% of total processing volume since early 2013.
Analysts suggest that even with the new 10-million-ton import quota, the company will continue to source other raw materials through alternative channels. However, insiders indicate that CNOOC’s marine oil supply to China National Chemical may be cut in half in 2013, dropping to around 2 million tons, while the supply of imported fuel oil could remain stable at 3 million tons. At the same time, the purchase of heavy crude oil may decrease slightly due to the availability of the new crude oil imports.
With this 10-million-ton crude oil import target, the total refining capacity of China National Chemical in 2013 is expected to more than double. According to the Axis Infosys Energy Report, Huaxing Petrochemical is projected to process 5.1 million tons, Changyi Petrochemical between 4.5 and 4.7 million tons, and Zhenghe Petrochemical around 3.5 million tons. Including two smaller refineries in Qingdao Anbang and Jinan, the total processing volume is estimated to reach 14.1 to 14.3 million tons—up by approximately 80% from 2012.
"As per the company’s plan this year, the raw material demand for each refinery is very high, and it heavily relies on the 10 million tons of imported crude oil to support operations," said a source from Changyi Petrochemical.