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Insight | Time: Jun 23 2017 3:23PM
China polyester enterprises marching toward oil refining sector
 
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There is a trend that enterprises to obtain more development potential expand their businesses in upstream market. In polyester industry, except for Xianglu and Rongsheng who have extended their businesses to PX market, most private enterprises are still devoted to horizontal growth. Currently however, Zhejiang Petrochemical Co., Ltd., (a joint venture of Zhejiang Rongsheng Holding Group, Tongkun Group, Juhua Group and Zhoushan Marine Comprehensive Development and Investment Co., Ltd.,) Hengli Group Co. Ltd., Shenghong Group Co.,Ltd, Hengyi Petrochemical Co., Ltd., have announced refinery and integrated petrochemical complex projects.

Overview
Project Scale Investment capital Location Progression Expected date to put into operation
Shenghong Refinery and Integrated Petrochemical Complex 16mln tons/yr crude distillation unit, 3.3mln tons/yr residuum suspended bed hydrogenation unit, 3.5mln tons/yr hydrogenation cracking unit, 3.6 mln tons/yr diesel oil cracking unit, 2.8 mln tons/yr aromatic combination unit and 4*150kt/yr sulfur recovery unit. 71.4bln yuan Lianyungang Petrochemical industrial base, Lianyungang City, Zhejiang Province and Xuwei port area Environmental impact assessment report announcement on Dec 16, 2016 2019
Zhejiang Petrochemical Co., Ltd. Refinery and Integrated Petrochemical Complex 20+20mln tons/yr crude distillation unit, 5+5 mln tons/yr residue hydrogenation unit, 3.8+3.8 mln tons/yr hydrogenation cracking unit, 8+8 mln tons/yr diesel oil cracking unit, 2+2 mln tons/yr catalytic gasoline hydrogenation unit, 8+8 mln tons/yr, continuous catalytic reforming unit, 5.2+5.2 mln tons/yr aromatic combination unit, 480+600kt/yr sulfur recovery unit. 173 bln yuan Zhejiang Zhoushan Green Petrochemical base The second announcement of environmental impact assessment report announcement in Sep, 2016 The first phase to put into operation in Dec, 2018
Hengli Refinery and Integrated Petrochemical Complex 10+10mln tons/yr crude distillation unit, 11.5mln tons/yr heavy oil hydrogenation unit, 2mln tons/yr hydrogenation cracking unit, 6 mln tons/yr diesel oil cracking unit, 4.5 mln tons/yr aromatic combination unit. 74 bln yuan Dalian Changxing Island Petrochemical base Has started construction since Dec 2016 In mid-2018
Hengyi(Brunei) PMB Refinery and Integrated Petrochemical Complex 8mln tons/yr crude distillation unit, 2.2mln tons/yr hydrocracking unit, 1.5mln tons/yr aromatic combination unit, 2.2mln tons/yr diesel oil cracking unit, 1.3mln tons/yr kerosene hydrotreating unit, 1mln tons/yr flexicoker. 3.45 bln USD Pulau Muara Besar(PMB), Brunei Begin civil construction on Jun 3, 2017 Finish construction in end-2018 and put operation in early 2019

The former three projects basically draw even with each other in capacity, while the project in Brunei is slightly smaller in this respect.

However, the investment capital of Hengyi’s refinery and integrated petrochemical complex in Brunei is far lower than that of the former three projects. Yet officials from Hengyi reflects that generally the larger the single unit capacity is, the more competitive the investment and cost becomes, thus compared with China domestic PX projects, their investment project is more competitive. What’ s more, Brunei Shell Petroleum Co Sdn Bhd will supply part of crude oil, which will to much extent lower investment cost.

In terms of the location, Shenghong and Hengli choose to build the plants near their PTA units. Zhejiang Petrochemical with its registered capital of 1 bln yuan, of which Rongsheng shares 51%, Juhua and Tongkun 20% respectively and Zhoushan Marine Comprehensive Development and Investment 9%, is sited in Zhoushan so as to exert an impact over East and South China. The refinery and integrated petrochemical complex in Brunei with a capacity of 8 mln tons/yr is a joint venture of Hengyi (70%) and Brunei Government (30%). It is a stepping stone for Hengyi to go overseas, an opportunity for the Group to extend its refinery business and most importantly a necessity for China chemical fiber industry to expand. This complex will yield benzene and PX, respective feedstock for CPL and PET, and could produce gasoline, diesel oil and kerosene which could be used to satisfy the need of Brunei in the first place and other products selling to other SEA countries.

All these four complexes are expected to put into operation in 2018-2019, with Hengli being the earliest, Zhejiang Petrochemical the second and Hengyi the third, while Shenghong the last. The practical date to start up depends on the construction progress.

Major products
Project Refinery capacity/(mln tons/yr) Aromatic capacity/(mln tons/yr) Olefin capacity/(mln tons/yr)
Shenghong Refinery and Integrated Petrochemical Complex 16 2.8 1.1
Zhejiang Petrochemical Co., Ltd. Refinery and Integrated Petrochemical Complex Phase I 20 5.2 1.4
Hengli Refinery and Integrated Petrochemical Complex 20 4.5 1.5
Hengyi(Brunei) PMB Refinery and Integrated Petrochemical Complex 8 1.5 0.5

China domestic major petrochemical plants are divided into three categories: fuel-producers, fuel and lubricating oil ones and fuel and chemicals manufactures. Zhenhai Refinery and Chemical, the first type, is capable of producing 23 million tons of oil, 1 million tons of aromatics and 2 million tons of olefin per year; Yangzi Petrochemical, the third type, has a capacity of 8 million tons/yr of oil, 0.65 million tons/yr of aromatics and 1.4 million tons/yr of olefin. These four complexes, different from traditional ones, will do their best to yield much more aromatics as feedstock for PX. And all of them have equipped with olefin and its downstream derivative units 

Project Refinery capacity/(mln tons/yr) Aromatic capacity/(mln tons/yr) Olefin capacity/(mln tons/yr)
Shenghong Refinery and Integrated Petrochemical Complex 16 2.8 1.1
Zhejiang Petrochemical Co., Ltd. Refinery and Integrated Petrochemical Complex Phase I 20 5.2 1.4
Hengli Refinery and Integrated Petrochemical Complex 20 4.5 1.5
Hengyi(Brunei) PMB Refinery and Integrated Petrochemical Complex 8 1.5 0.5

Production process
Zhejiang Petrochemical Co., Ltd. Refinery and Integrated Petrochemical Complex Phase I and II mainly produce aromatics while also yield certain amount of ethylene and product oil. It focuses on developing differential and large-scale aromatics and downstream industrial chain of ethylene. The core production process for oil refining needs atmospheric and vacuum distillation unit+ delayed coking unit+ residuum hydrodesulfurization/heavy oil catalytic cracking unit+ hydrogenation cracking unit+ diesel oil cracking unit+ continuous catalytic reforming unit+ aromatic combination unit. Ethylene needed for production all comes from the oil refinery units. Downstream markets of ethylene and propylene are put on the top agenda of development.

Shenghong Petrochemical integrate oil refining, aromatics and ethylene into its process model and applies a production process of crude oil processing+ heavy oil hydrocracking+ PX+ ethylene cracking+ IGCC(Integrated Gasification Combined Cycle). The company moves to develop large-scale units. The capacity of its crude distillation unit reaches 16 million tons/yr and that of hydrogenation unit reaches 19.2 million tons/yr.

Hengli Petrochemical (Dalian) refinery and integrated petrochemical complex processes heavy and medium crude oil and marine crude oil with full-hydrogenation process, the capacity of which reaches 23million tons/yr. It uses two atmospheric and vacuum distillation units, one heavy oil hydrogenation unit, kerosene hydrotreating unit, diesel oil cracking unit and aromatic combination unit.

Hengyi(Brunei) PMB (Pulau Muara Besar) Refinery and Integrated Petrochemical Complex has a capacity of 1.5 million tons/yr PX, 0.5 million tons/yr benzene, 1.5 million tons/yr diesel oil, 0.4 million tons/yr gasoline, 1 million tons/yr aviation oil, 1.5 million tons/yr light naphtha. Its feedstock mainly composes of crude oil and condensate oil, part of which comes from Shell in Brunei. The accessory aromatic combination unit with a capacity of 1.5 million tons/yr of PX applies the world advanced Honeywell technology given the application performance, stable operation and safety and reliance of the unit. What’s more, selling its PX and benzene and other chemicals to downstream plants may boost industrial integration of the enterprise, guarantee the profits and production safety and ensure sustainable development of the enterprise. 

These four complexes also apply a process model of oil refining, aromatics and ethylene integration and do everything possible to improve PX production for the operation of their PTA units. The products concerned are oil, aromatics, olefin and other chemicals. Except for Hengyi’s project in Brunei whose detailed information remains unknown, the production process of the major parts of other three projects have limited difference.

Rongsheng and Hengyi jointly established Zhejiang Yisheng Petrochemical Co., Ltd., the biggest PTA producer in China. To supply ample PX for the production of this joint venture, Zhongjin Petrochemical, subsidiary of Rongsheng put into operation new unit in the third quarter of 2015 mainly to produce PX. It has a capacity of 1.6 million tons/yr of PX disproportionated from toluene and xylene and also produces benzene 486.5kt/yr and C5, C6 and other chemicals totaling around 330kt/yr. The traditional production process of PX is heavy naphtha-catalytic reforming-aromatic extraction-aromatic separation-PX, yet as heavy naphtha is hard to obtain, Zhongjin Petrochemical equips a pre-working unit that could process fuel oil or condensate oil into heavy naphtha and could flexibly choose up-to-the-standard naphtha as feedstock or even directly produce PX with MX as feedstock. 

Comprehensive impact
According to CCFGroup’s statistics, China domestic PX production reached only 9.91 million tons in 2016, while import volume hit high to 12.36 million tons, meaning an import dependency rate of 55.7%. As Zhejiang Petrochemical, Hengli and Shenghong as well as Hengyi in Brunei would produce PX for the production of their own PTA plants, the duly start-up of these four complexes would yield 14 million tons of PX per year. This means that China PX imports after 2019 would slump, slashing the import dependency rate and China would gradually become self-sufficient in PX production and upgrade oil-PX-PTA-PET industrial chain, even global PX industry may be greatly impacted.
In recent years, new polyester capacity concentrated in large plants such as Tongkun, Xinfengming and large plants acquired small ones, like the acquisition of Longteng and Hongjian by Hengyi and Nanfang by Tiansheng(Related article, please visit: http://www.ccfgroup.com/newscenter/newsview.php?Class_ID=600000&Info_ID=20170527040). Among around 100 polyester plants, the capacity of the large ones which are capable of producing polyester products over one million tons/yr seize over half of the total, while these plants number only 15. With the advancement of these plants towards the oil refining sector, they are expanding their gap with other plants, intensifying industrial concentration and exerting an indispensable impact on the industry.

China oil refining capacity reached 0.75 billion tons/yr till end-2016. Refineries with a capacity of over 10 million tons/yr numbers 25, totaling a capacity of 0.32 billion tons/yr of oil refining, 42.7% of the total. Processed crude oil reached 524 million tons in 2016, indicating a capacity usage rate of 70%. Calculated with a run rate of 85% (international standard), China oil refining overcapacity reaches around 100 million tons/yr. Thus the start-up of the three domestic complexes would speed up oversupply of product oil and would foster competition with oil refineries in Shandong, a concentrated area of oil refining capacity. In fact, in face of exacerbated product oil over-supply, refineries in Shandong have already been heard to extend businesses in PX sector. News goes that Sinochem Hongrun Petrochemical Co., Ltd., Dongying United Petrochemical Co., Ltd., and Bridge Group and Wudi Xinyue Chemical Co.,Ltd. may start PX projects soon. PX and oil refining sectors will surely become more associated with each other.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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