China’s Sinopec to spend $29 billion upgrading four refining bases

BEIJING (Reuters) – China’s Sinopec group, parent of Sinopec Corp, will invest 200 billion yuan ($29.05 billion) to upgrade four refining bases between 2016 and 2020 to produce higher-quality fuels, the company said in an emailed statement on Thursday.

Sinopec’s upgrades come as China, the world’s second-biggest oil consumer, is embracing more stringent fuel standards in its battle against pollution and suffering an overall glut in refining capacity.

After the upgrades, the total refining capacity of the four refining sites will reach 130 million tonnes per year, or 2.6 million barrels per day (bpd), while ethylene capacity will reach 9 million tonnes per year (tpy), Sinopec said.

After the expansions, the bases will make up 45 percent of Sinopec’s total refining capacity and 65 percent of its ethylene capacity.

“It’s a strategic move that fits the global industrial trend for clustered and scaled growth and helps transform China’s petrochemical products to medium and high quality,” the company chairman Wang Yupu was cited as saying in the statement.

Between the four bases, Sinopec will be able to optimize the product structure and reduce logistics cost.

Sinopec, Asia’s largest refiner, started construction in December of a greenfield oil refinery and petrochemical complex in Zhanjiang that includes a 200,000 bpd refinery and an 800,000 tpy ethylene complex.

The refinery will mainly produce gasoline and diesel that meets the “national six” specifications, up from the previous Euro V guidelines that cap sulfur content at 10 parts per million (ppm), said Sinopec in the statement.

The new plant will be geared toward producing gasoline and aviation fuel at the expense of diesel, the firm said.

After the upgrades, Sinopec estimates the four sites will generate revenue of 800 billion yuan by 2020, based on $54 a barrel crude oil prices.