The heavy pound broke through the dilemma of north-south attack, and Shandong sought to build a 40 million ton refining and chemical base!


In front of the 40 million tons of Zhejiang Petrochemical and 20 million tons of Hengli Petrochemical to be put into production, dozens of local refineries in Shandong are like a group of small sampans scattered under two giant ships.
In China's petrochemical territory, Shandong once had more than 70% of the country's local refineries, with a total refining capacity of 210 million tons, making it the third largest refining center in the world. In the past, when there was a shortage of oil, private gas stations all over the country would rush to the refinery in Shandong and line up in front of the refinery.
But now, with Zhejiang Petrochemical located in Zhoushan, Zhejiang Province, and Hengli Petrochemical located in Dalian, Liaoning Province coming into production, Shandong Refinery, which is small in scale, large in number, and backward in technology, is facing a north-south attack from two major rivals.
In February 2019, the work report of Shandong Provincial Government put forward, "accelerate the promotion of refining and chemical integration, and fully promote the preliminary work of Yantai Yulong Island refining and chemical integration project".
This is a large-scale refining and chemical base project with a planned total capacity of up to 40 million tons, bearing the burden of the integration, transformation and upgrading of the entire refining and chemical industry in Shandong. Shandong, which has lagged behind a step, tries to rebuild the former glory of refining and chemical industry.
Secondary integration
"The Yulong Island Refining and Chemical Integration Project is in the early stage, with a planned capacity of 40 million tons, which will be carried out in two phases." According to the official of Shandong Chemical Industry Transformation and Upgrading Office, the project will be integrated first, and then the refining project will be launched.
On February 19, 2019, at the "Two Sessions" of Shandong Province, Governor Gong of Shandong Province proposed in the government work report that "accelerate the promotion of refining and chemical integration, and fully promote the preliminary work of Yantai Yulong Island refining and chemical integration project". It attracted extensive attention both inside and outside the industry.
Yantai Yulong Island is located in Longkou Bay, Bohai Sea, Longkou City, Yantai, Shandong Province. In May 2010, the Longkou artificial island group was officially approved by the State Oceanic Administration, and the Longkou government decided to fill the sea and land, and hand over the filling, construction and investment promotion of the artificial island group to Nanshan Group. In January 2011, the construction of the artificial island group was started, and it was basically completed by September 2014, renamed as "Yulong Island".
At that time, the National Development and Reform Commission was planning to build a large petrochemical industry base across the country, and Jiangsu, Liaoning, Zhejiang, Fujian, etc. all participated in the competition. In 2015, Nanshan Group began to plan to cooperate with Jurong International, Singapore, and invest 30 billion dollars to build a large-scale refining project of 40 million tons/year in Yulong Island. However, one week after the announcement of the EIA of the project in May 2016, local residents objected and the project was stopped by the government. As a result, Shandong refining and chemical industry missed the first round of national planning to build a large petrochemical base, so that it was overtaken by other provinces.
Today, two years later, Yantai Yulong Island has once again become a hot spot for petrochemical investment, but the project has changed. A month ago, Chen Fei, acting mayor of Yantai, said in the 2019 work report of Yantai Municipal Government, "Actively participate in the restructuring of Shandong Local Refinery, strive to start the construction of Wanhua Yulong Refining and Chemical New Materials Project as soon as possible, and create new advantages for development with major projects."
A senior manager of Nanshan Group introduced to the reporter that the previous Yulong Island project was mainly invested by Nanshan Group and Jurong International Corporation of Singapore. The senior management of Nanshan Group has visited JTC International in Singapore, because the Singapore Jurong Island invested and built by the company has become a world-famous oil refining center with mature operating experience. Now, the Wanhua Yulong Island project has been driven by the Shandong Provincial Government, and Nanshan Group is only one of the participants. He revealed that new projects will have new changes in production capacity, products, investors and other aspects, and whether JTC International will continue to participate is uncertain.
Wanhua Chemical (42.080, 1.21, 2.96%) Group Co., Ltd. (hereinafter referred to as "Wanhua Group") is a new chemical material company with global operation, whose business covers polyurethane industry clusters such as MDI, TDI, polyether polyol, etc. However, this chemical giant has always focused on high-end chemicals in the downstream of the industrial chain, never involved in the upstream refining industry, and rarely interacted with local refineries.
A relevant person of Wanhua Group confirmed that Shandong Province hoped that Wanhua Group would take the lead in the integration of local refining and Yulong Island refining and chemical integration projects, but research and discussion are ongoing within the enterprise, and there is no final conclusion at present. The above officials of Shandong Chemical Industry Transformation and Upgrading Office also said that "at present, no project legal person has been determined".
It has always been Shandong's long cherished wish to integrate, become bigger and stronger. Although Shandong's local refining capacity once accounted for 70% of the country's total refining industry of more than 300 billion, and the total refining capacity reached 210 million tons, it has grown into the world's third largest refining center; However, Shandong Refining and Chemical Co., Ltd. has a pattern of large number (more than 40), small scale (60% of refineries have a processing capacity of less than 3 million tons/year, and only about 20% have a processing capacity of more than 5 million tons/year), and scattered distribution (distributed in Dongying, Zibo, Binzhou and Weifang).
After China liberalized the right to import and use crude oil for private enterprises, seven petrochemical industrial bases emerged in 2016, including Changxing Island in Dalian, Caofeidian in Hebei, Lianyungang in Jiangsu (3.660, 0.05, 1.39%), Ningbo in Zhejiang, Caohejing in Shanghai, Huizhou in Guangdong and Gulei in Zhangzhou in Fujian. Compared with the large base of tens of millions of tons, Shandong Refining is inferior in scale, product and technology.
In fact, in 2016, Shandong Local Refinery had foreseen its own lack of competitiveness and started the first round of spontaneous integration attempt, which was a market-oriented exploration driven by large local refineries.
In 2016, Shandong Petrochemical Co., Ltd. registered "Zhong'an Petroleum", and intended to take the lead in integrating about 6000 private gas stations in Shandong Province, with the large-scale local refining Jingbo Petrochemical. In July of the next year, Li Xiangping, chairman of Dongming Petrochemical, Shandong's largest refinery, proposed the idea of establishing a "Shandong Refining and Chemical Group", which was initiated by an enterprise that has obtained the right to use imported crude oil in Shandong Province. The group was established in the form of mixed ownership to promote collaboration in raw material procurement, oil transportation, sales channels, retail terminal management, etc.
However, Shandong Local Refining Co., Ltd. has too many subjects, similar scale, different equity, and rich profits after obtaining oil rights, so far this round of market-oriented integration has never made progress.
Last chance
In the first half of 2019, 40 million tons of Zhejiang Petrochemical and 20 million tons of Hengli Petrochemical will be put into production soon. In China's refining territory, dozens of local refineries in Shandong are like a group of small sampans scattered under two giant ships.
In the past, Shandong Local Refinery could grow savagely in the crevice of "three barrels of oil" with its flexible mechanism, new equipment and technology, and keen market awareness; Now, the construction of petrochemical bases of large private enterprises has made Shandong Dilian really feel oppressed and impacted by its rivals.
A senior manager of the local refining company analyzed that the refining industry is a typical economy of scale. The emerging large-scale private petrochemical bases are large in scale, low in cost, new in technology, and long in industrial chain. Compared with them, Shandong local refining company has no advantages. In the north-south collision, the gasoline and diesel produced by Shandong Local Refinery will be difficult to maintain the national sales market in the past, and will inevitably face overcapacity. If the industry cannot be integrated in time, it will be difficult to stand in the future.
As a result, Shandong began to conceive the second round of government led industrial integration - to promote the restructuring of local refining industry and the transformation of new and old kinetic energy of refining industry with the help of the Yulong Island Refining and Chemical Integration Project, and reshape regional competitive advantage. As Zhang Shuping, secretary of Yantai Municipal Party Committee, said, "The Yulong Island Refining and Chemical Integration Project means the transformation and upgrading of Shandong's chemical industry".
In fact, Shandong Provincial Government has started to pave the way for the transformation, upgrading and integration of local refining since the second half of 2018.
On October 29, 2018, Shandong Provincial Government released the Implementation Plan on Accelerating the High Quality Development of Seven High Energy Consumption Industries. Among them, the transformation and upgrading objectives of the local refining industry are clearly set forth - strive to integrate and transfer the local refining capacity of 3 million tons and below by 2022; By 2025, the oil refining capacity of 5 million tons and below will be integrated and transferred in batches and steps... Large enterprise groups with international competitiveness and world-class industrial bases for fine chemical, green chemical and new chemical materials will be cultivated.
A manager of Nanshan Group said that in December 2018, Liu Jiayi, Secretary of the CPC Shandong Provincial Committee, had visited Yulong Island in Yantai. Later, the Yulong Island project was listed in the work report of Yantai City and Shandong Provincial Government as a key investment project.
At present, the 40 million ton Yulong Island project will bear the burden of the integration, transformation and upgrading of the entire Shandong refining and chemical industry.
According to the procedure of "integration first and then launching the project", the integration of small-scale refining is the first to bear the brunt. However, a senior manager of Zibo Local Refinery, who did not want to be named, pointed out that Shandong Local Refinery has a large number of local state-owned enterprises, large taxpayers, and many employees. The integration of production capacity and crude oil quota of various enterprises into Yantai Yulong Island will inevitably involve many issues such as assets, taxes, personnel placement, and the balance of interests between regions.
In fact, in the view of the industry, the crude oil quota obtained by each local refining enterprise is subject to great changes. Without considering the new refineries and individual differences each year, the distribution form and approval criteria of local refining import quota determine that the local refining crude oil quota decreases year by year, because the distribution criteria in the current year are the import performance of the previous year. Once the market changes and imports decline, the quota for the next year will be affected.
Zhou Guoxia, an analyst of Jinlianchuang, pointed out that the integration of the refining industry is the general trend and has become the consensus of the industry, but Wanhua Group has not been involved in the upstream refining sector.
At the same time, the Bohai Sea is a semi closed inland sea. In the newly released 2017 China Marine Ecological Environment Status Bulletin "Serious Pollution Area", the "Liaodong Bay, Bohai Bay, and Laizhou Bay" that make up the Bohai Sea are all outstanding. Whether the Bohai Sea will carry 40 million tons of large-scale petrochemical base projects must also be comprehensively considered at the national level.
As it is still in the early stage of the project, there are still many uncertainties in the main body, engineering planning, environmental assessment and other work of the Yulong Island Refining and Chemical Integration Project. As an official of Shandong Chemical Industry Transformation and Upgrading Office said, this project has made progress and changed every day
However, it can be determined that the integration of Shandong refining and chemical industry has become the consensus of the government and enterprises. As one industry figure said, this may be the last opportunity for Shandong refining and chemical industry to catch up.