Analysis of New Large-Scale Refining and Chemical Projects in Local Refineries

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In recent years, with the rapid economic growth in our country, domestic demand for refined oil products has increased sharply; in 2015, the apparent consumption volume reached 276 million tons, ranking second in the world. The prosperity of the refined oil market has not only driven growth in the refining operations of state-owned oil companies but also created opportunities for the development of local refineries. After nearly 20 years of development, domestic refineries in our country have grown into a force that cannot be ignored. In 2015, the total refining capacity of domestic refineries exceeded 200 million tons per year, accounting for 28% of the country’s total refining capacity. Currently, local refining enterprises are mainly located in oil-producing provinces and regions such as Shandong, Shaanxi, and Liaoning, accounting for 56%, 11%, and 8% of the total local refining capacity respectively. Although there is an overcapacity in China’s refining sector at present, local refineries are still accelerating the commissioning of large-scale refining and chemical projects in order to improve quality and enhance competitiveness. It is foreseeable that competition between state-owned enterprises and local refineries will intensify in the future. Large-scale domestic refining projects set to come online: During the 13th Five-Year Plan period, several large-scale domestic refining projects are planned to be built in China, including those operated by Hengli Petrochemical, Zhejiang Petrochemical, Shenghong Petrochemical, and Xuwei Refining & Chemical. The crude oil processing capacity of these refineries is all above 10 million tons per year, and competition within China’s refining industry is set to intensify in the future. Hengli Petrochemical has been designed with a crude oil processing capacity of 20 million tons per year. It adopts a fully hydrogenation process route that includes vacuum distillation, hydrocracking, and aromatization, and is primarily used for processing crude oil imported from abroad and producing aromatics. The capacity of the aromatics complex is 4.5 million tons per year, with additional production of transportation fuels and other petrochemical products as well. To address the raw material supply for PTA projects and alleviate the supply-demand imbalance in the oil and petrochemical products markets in the local area and surrounding regions, Hengli Group proposed building a large-scale integrated refining and chemical project. In August 2016, it was included in the **NDRC’s three-year rolling key project for promoting the revitalization of the old industrial bases in the Northeast region**, and construction has now accelerated; operation is expected to begin by the end of 2017. Once put into production, it will create a complete industrial chain that starts with PTA and includes polyester production, textiles, garment manufacturing, and more. The construction scope of this integrated refining and chemical processing plant includes process production units, storage and transportation systems, utility facilities and auxiliary production equipment, as well as docks, inter-plant pipeline corridors, seawater pumping stations, and seawater discharge pipelines. Zhejiang Petrochemical’s total crude oil processing capacity is 40 million tons per year, its aromatic hydrocarbons production capacity is 10.4 million tons per year, and its ethylene production capacity is 2.8 million tons per year. It will be implemented in two phases; the capacity of the first phase is 20 million tons per year for crude oil processing, with capacities of 5.2 million tons per year for aromatics and 1.4 million tons per year for ethylene. The main facilities include 22 refining units and 15 chemical processing units ； The scale of the core units for refining, aromatics, and ethylene in Phase 2 is the same as that in Phase 1, including 22 refining units and 12 chemical processing units. The overall processing process is based on the principle of balancing the production volumes of refined oil products and chemical products, with an emphasis on producing more aromatic compounds and ethylene, while also manufacturing refined oil products to a certain extent; at the same time, efforts are focused on developing the downstream industrial chains for aromatic compounds and ethylene. The refining section adopts a comprehensive process flow that includes atmospheric and vacuum distillation, delayed coking, residue hydrodesulfurization/heavy oil catalytic cracking, wax oil hydrocracking, diesel hydrocracking, and continuous reforming/aromatics combined units. All the ethylene feedstock comes from refineries. Through an integrated process arrangement for refining, chemicals, and aromatics, the raw materials used in various processes are optimized, thereby reflecting integration in refining and chemical production. Shenghong Petrochemical has a capacity of 16 million tons per year for oil refining, 2.8 million tons per year for aromatics, and 1.1 million tons per year for ethylene and its downstream derivatives; it also includes a crude oil terminal with a capacity of 300,000 tons as well as utility islands. Completion and operation are expected in 2019. In line with its own strategic development and the need to expand its industrial chain, the petrochemical industry is being developed in the Lianyungang Petrochemical Industry Base. The Shenghong Petrochemical Industrial Park now houses a 1.5 million tons per year PTA production facility, 3 liquid chemical berths, storage capacity of nearly 1 million cubic meters for liquid chemicals, and an alcohol-based multi-product production plant with a capacity of 3.6 million tons per year. To further develop its operations and secure the raw materials needed for its PTA projects, Shenghong Group has decided to develop an integrated refining and chemical processing project in the Lianyungang petrochemical industry base. The project is designed according to an integrated processing model for refining, aromatics, and ethylene, adopting a total process flow scheme that includes crude oil processing + heavy oil hydrocracking + aromatics + ethylene cracking + IGCC. Designed to meet the requirements of larger scale and cleaner operations, profits in the refining industry are becoming increasingly slim. Coupled with China’s growing energy demand, its reliance on imported crude oil has exceeded critical levels. Therefore, energy conservation and consumption reduction are not only related to corporate efficiency but also represent important measures for improving China’s energy utilization rate and reducing crude oil imports. The processing capacities of the three large refineries to be built will all reach international large-scale levels, exceeding 16 million tons per year. In particular, Zhejiang Petrochemical will, once completed as planned, become China’s largest oil refining company and rank fifth in the world. The scale of some individual units even reaches world-leading levels; for example, the two atmospheric and vacuum distillation units at Hengli Petrochemical each have a capacity of 10 million tons per year. The experience of improving the quality of clean fuels in Europe, the United States, Japan and other regions shows that hydrogenation units are key facilities for upgrading the quality of petroleum products. For example, in the refineries located in California, where the standards for gasoline and diesel quality are the strictest in the United States, the proportion of hydrogenation capacity is much higher than that in ordinary refineries. A comparison of the structure of refining facilities in California with that in the rest of the United States shows that California’s hydrogenation capacity is higher than the national average; in particular, its hydrocracking capacity is roughly twice that of the rest of the country. The hydrogenation capacity of these three newly built local refineries accounts for over 97.5% of the total refining capacity; in fact, this proportion is even higher than 100%. This is because the existing statistics on Hengli Petrochemical’s hydrogenation capacity do not include specific data regarding the hydrogenation capacity related to naphtha, and therefore the naphtha hydrogenation capacity is not taken into account in the total hydrogenation capacity of Hengli Petrochemical. The total hydrogenation capacity of Shenghong Petrochemical accounts for 120% of its refining capacity, which is higher than the 18.5% share of hydrogenation capacity in U.S. refineries; it is only 6.7% lower than the hydrogenation capacity ratio in refineries in California, USA. The hydrogenation capacity of Zhejiang Petrochemical accounts for 117.5% of its crude oil processing capacity, a figure that lies between those of California in the United States and the national average in the U.S. Hengli Petrochemical’s hydrogenation capacity accounts for at least the same proportion as the average hydrogenation capacity in the United States. In addition to its hydrogenation capacity being at a world-leading level, the proportion of reforming units and alkylation units used for producing clean fuels in these three large refineries is generally higher than that in state-owned major refineries. Integration and park-based development enhance refinery competitiveness. Nowadays, it has become a trend for new oil refineries to move in the direction of integration with chemical processing. In addition to having facility structures for upgrading oil quality that are at the world’s advanced level, the three major refinery projects have made significant efforts in terms of the configuration of integrated refining and chemical processing facilities, each with its own characteristics. The downstream products of Zhejiang Petrochemical’s ethylene include EO/EG, LLDPE/HDPE, HDPE, EVA, hexene-1, and styrene ； Downstream products of propylene include polypropylene, phenol propyl ether, bisphenol A, and acrylonitrile, etc.; propylene production is increased through propane dehydrogenation using purchased raw materials ； Mixed C4 is used to produce butadiene and MTBE ； The raffinate of mixed C4 hydrocarbons, ethylene hydrogenated gasoline, and by-produced hydrogen are sent to refining and aromatic units for processing. Through an integrated process arrangement for refining, chemicals, and aromatics, the raw materials used in various processes are optimized, thereby reflecting integration in refining and chemical production. Hengli Petrochemical has adopted the aromatic compounds route, while Shenghong Petrochemical is designed following an integrated model of refining, aromatic compounds production, and ethylene production; it uses a total process flow that includes crude oil processing + heavy oil hydrocracking + aromatic compounds production + ethylene cracking + IGCC. Integrated refining and chemical operations enable companies to gain greater flexibility in the face of a constantly changing market for petroleum products and chemical goods. According to the **National Development and Reform Commission’s Plan for the Layout of the Petrochemical Industry**, China’s petrochemical industry will be organized into two major regions, three key sectors (refining, olefins, and aromatics), and seven major bases (Dalian Changxing Island, Cao Feidian in Hebei, Lianyungang in Jiangsu, Caojing in Shanghai, Ningbo in Zhejiang, Huizhou in Guangdong, and Gulei in Fujian). The three refineries that are planned to be built are all located within or near these seven designated petrochemical bases, and the integrated petrochemical projects also fall within the three sectors that China intends to develop. These are coastal areas that facilitate the transportation of crude oil and its products in our country; they are equipped with docks and storage and transportation facilities, which reduces the costs associated with transporting raw materials and products and thus increases profit margins. Such as the 300,000-ton crude oil terminal and utility island supporting Shenghong Petrochemical ； Hengli Petrochemical is equipped with a dock, inter-plant pipeline corridors, seawater pumping stations, seawater discharge pipelines, and more. The East China region has the highest demand and the fastest growth in refined oil consumption in China, with the locations of the two major refineries both situated in areas with the strongest consumer demand. All three refineries are located in coastal areas, and choosing to export is advantageous from a geographical perspective, especially given the increasing surplus of oil and petrochemical products in the country.