Sinopec plans $1.2 bln refinery in Hainan - sources
Date: 13-Aug-04
Country: SINGAPORE
Author: Chen Aizhu
Sinopec is confident of winning Beijing's approval soon for the 10 billion yuan investment, nearly one-seventh of the tropical island's economy, which has attracted interest from cash-rich Chinese banks, they said.
It aims to complete the project, which includes an eight million tonne-per-year (164,400 barrel-per-day) refinery and a terminal to dock 300,000-tonne oil tankers, by the end of 2006.
Sinopec, China's second-largest state oil giant, took over the project in 2003 after Beijing shelved a proposal mooted by a Hong Kong business group in the mid-1990s due to concerns of over-capacity and environmental issues.
State refiners, pumping at full tilt this year, are rushing to boost their refining capacities, forecast to expand by nearly a third in the next five years.
Demand growth in the world's second-largest oil consumer, after the United States, is forecast at around 14 percent this year, the International Energy Agency said.
"It's the market growth that's behind the Hainan project. It's close to where the main markets are and also stands to compete with potential imports from Singapore and South Korea," a senior Sinopec adviser said.
Last month, Beijing gave Sinopec and CNOOC Group the green light to construct two new refineries, at a total cost of $3.3 billion, by 2008 in Qingdao city in the east and Huizhou in the south.
The adviser said Sinopec was invited by the provincial government of Hainan, famed for its beaches and rainforests, to boost its tourism-dependent local economy.
IMPACT ON ENVIRONMENT
"We studied the environmental impact very carefully, so the refinery is designed to produce cleaner fuels and will therefore be more expensive," the Sinopec official said.
The refinery, to be located in the Yangpu economic zone, will process mostly imported crude with a sulphur content of less than one percent, though it is close to China's offshore oilfields in the South China Sea.
It aims to feed mainly oil-thirsty southern Guangdong province, China's largest and wealthiest region, as well as southwestern provinces via Sinopec's oil pipeline grid under construction in the Guangdong area.
Sinopec was also looking at exporting refined products to Asian buyers such as Vietnam and Indonesia, sources said.
Chinese state banks such as China Development Bank and the Industrial and Commercial Bank of China were interested in funding the Hainan project, a banking source close to the project said.
"The banks are upbeat about China's oil demand growth," the source said.
The Sinopec official said the project was likely to be transferred to its New York and Hong Kong-listed unit Sinopec Corp (0386.HK: Quote, Profile, Research) (SNP.N: Quote, Profile, Research) , but the approval process would be swifter by letting the group take the lead first.
Hainan, with a population of just over eight million and gross domestic product of some $8.5 billion, is one of China's smallest regional economies, generating its revenue from tourism, fertiliser production and auto making. (This story is linked to a table of Chinese refinery expansions, please click on [nSP154874])