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10 million tons of crude oil import index finalized
China Chemical Industry Group, a major player in the Chinese refining sector, operates nine refineries with an annual crude oil processing capacity of 25 million tons. Among these, six are located in Shandong Province, where the group's largest facilities include Huaxing Petrochemical (8.5 million tons/year), Changyi Petrochemical (8 million tons/year), and Zhenghe Petrochemical (6.5 million tons/year). Despite being a central state-owned enterprise, the group’s Shandong-based refineries face chronic raw material shortages, similar to many private refineries in the region.
According to Chen Ching, an analyst at Zhuo Chuang, the group’s Shandong refinery operated at just 40% capacity last year due to limited crude oil supply. The recent allocation of a 10-million-ton crude oil import quota is expected to significantly ease this pressure. This increase in supply will not only help meet the demand of the refineries but also improve profitability, as crude oil typically offers better economic returns compared to fuel oil.
Historically, China National Chemical Industry relied heavily on CNOOC for its raw materials. In 2012, it 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 company sourced large quantities of South American heavy crude oil from the spot market, accounting for about 15–20% of its total processing volume since early 2013.
Analysts believe that even with the new import quota, the company will continue to seek other supply channels. However, sources suggest that CNOOC’s marine oil supply to China National Chemical may be reduced to around 2 million tons in 2013, while fuel oil imports could remain stable at 3 million tons. Meanwhile, the purchase of heavy crude oil is expected to decline slightly with the arrival of the 10-million-ton crude oil import.
With the new import target, the group’s total refining capacity is projected to more than double in 2013. According to the Axis Infosys Energy Report, Huaxing Petrochemical is expected to process 5.1 million tons, Changyi Petrochemical between 4.5 and 4.7 million tons, and Zhenghe Petrochemical around 3.5 million tons. Adding two additional refineries in Qingdao and Jinan, the total processing volume is estimated to reach 14.1–14.3 million tons, representing an 80% increase from 2012.
“As per the company’s plan this year, each refinery has a huge raw material demand, and this largely depends on the 10 million tons of imported crude oil to support operations,†said a source from Changyi Petrochemical. With the increased supply, the group is well-positioned to boost production and improve its overall performance in the coming year.