【Haichuan Chemical Engineering News】With an annual production capacity of 60 million tons, this giant petrochemical facility in Shandong is set to begin operations by the end of the year

The draft proposal indicates that the Yulong Industrial Park does not fall within the scope of the seven planned petrochemical industry bases; the construction of refining and chemical processing facilities in this park is aimed at integrating Shandong’s local refining industry, and it will be completed in three phases. Among them, in the near term (2019–2025), projects for integrated refining and chemical processing with an annual capacity of 20 million tons, as well as projects for the comprehensive utilization of light hydrocarbons, are planned. The latter mainly includes a 1 million tons per year ethane-to-olefins project, an integrated marine chemical industry project, a high-end petrochemical and new materials industrial zone, as well as the construction of infrastructure such as utility facilities, in order to ensure a high-standard start for the development of the industrial park. Under the medium-term plan (2026–2030), new integrated refining and chemical projects with a capacity of 20 million tons per year will be added, along with another facility for producing olefins from ethane with a capacity of 1 million tons per year. Additionally, zones for high-end manufacturing will be established, thereby facilitating the growth and development of the industrial park. In the long term (2031–2035), another 20 million tons per year of integrated refining and chemical processing capacity will be added, further improving the upstream and downstream industrial chains to achieve a fully developed industrial park.

Yantai Yulong Island is located in Longkou Bay of the Bohai Sea, in Longkou City, Yantai. In May 2010, the Longkou artificial island cluster officially received approval from the **Maritime Administration. Construction of the artificial island cluster began in January 2011 and was largely completed by September 2014, after which it was renamed Yulong Island. As several large-scale petrochemical projects in the north and south, such as Hengli Petrochemical and Zhejiang Petrochemical, are being built at an accelerated pace, Shandong, the largest petrochemical province in China, may be under considerable pressure. In 2019, the Yulong Island refining and chemical integration project was put on the agenda, tasked with driving the transformation of the energy sources in Shandong’s petrochemical industry and promoting high-quality development. In accordance with Shandong Province’s previously established principle of transforming local refineries by first introducing new capacity and then phasing out outdated capacity, and following a ratio of 1:1.25, 60 million tons per year of new refining capacity will be established, while 75 million tons of outdated capacity will be phased out. For a long time, Shandong Province has led the country in terms of the strength of its petroleum and chemical industries. According to data from the Shandong Provincial People’s Website, Shandong’s current annual processing capacity for crude oil is 210 million tons, accounting for 28% of the country’s total crude oil processing capacity. Of this, the local refining capacity is 130 million tons per year, accounting for 70% of the total domestic refining capacity.

The draft proposal shows that Shandong Province has a large number of petrochemical enterprises, but their average size is relatively small, and the quality of these enterprises varies widely. As of the end of September 2015, there were approximately 17,200 petrochemical enterprises registered with the industrial and commercial authorities in Shandong Province, of which 4,506 were enterprises above a certain scale, accounting for only 26.2% of all registered enterprises. This leads to problems such as difficulties in regulating the industry and challenges in addressing environmental pollution. Among the local refining enterprises in Shandong Province, the average primary processing capacity for crude oil is only 2.3 million tons. There is only 1 enterprise with a processing capacity of over 10 million tons ； Enterprises with a production capacity of less than 2 million tons account for 55.1% of the regional refineries in the province, and these enterprises have a significant gap in technical capability compared to larger refineries. Meanwhile, Shandong Province has a low level of integration in refining and chemical processing, with short industrial chains. At present, Shandong Province has only one ethylene plant in Qilu Ethylene with an annual production capacity of 800,000 tons, while the South Korean company Qingdao Lido Chemical operates a PX plant with an annual production capacity of 700,000 tons. Due to constraints imposed by the scale of the ethylene industry and regional development policies, as well as limitations related to the quality of raw materials and the scale of refining operations, local refining companies do not yet have ethylene production facilities or large-scale aromatic compounds processing units. Their main products are gasoline and diesel, with chemicals accounting for a small proportion, which hinders the industry’s transformation and upgrading. The Guidelines state that, given the above circumstances, the Shandong Yulongdao refining and chemical integration project will design its overall process flow in accordance with the principle of \"less oil, more aromatics, and more olefins\"; it will import and process Saudi light and Saudi heavy conventional sulfur-containing crude oils, while focusing on the development of downstream deep processing activities. Aiming to supply the largest possible amount of high-value chemical raw materials while ensuring oil product quality, this project seeks to establish a world-class high-end petrochemical industry hub.

Currently, China faces a severe oversupply of refining capacity. According to the \"2018 Report on the Development of the Oil and Gas Industry at Home and Abroad\" released by CNPC, by the end of 2018, China’s refining capacity was 831 million tons per year, an increase of 22.25 million tons per year compared to the previous year; as a result, domestic refining capacity exceeded 90 million tons per year. Although there is an overall surplus in domestic refining capacity, the average scale of individual refineries is small and the level of integration is low. The average capacity of domestic refineries is 4.12 million tons per year, which is a significant difference compared to the world average of 7.59 million tons per year. In the past two years, domestic refining and chemical enterprises, especially local refineries, have accelerated the construction of large-scale, integrated refining and chemical plants that emphasize chemical production as the main activity with oil processing as a supplementary one. At present, Hengli Petrochemical, with a crude oil processing capacity of 20 million tons per year, has been fully operational ； The first phase of Zhejiang Petrochemical, with a refining capacity of 40 million tons per year, also began operations in May this year.

Recently, Yantai has attracted a great deal of attention in Shandong’s petroleum and petrochemical industry. The Yulong Island integrated refining and chemical project in Longkou, Yantai, has seen progress from land reclamation in 2010 to the forced suspension of the project in 2016; after years of preparation, it has recently started to see significant developments. First, in June of this year, the people’s government of Shandong Province decided to establish the Shandong Yulong Petrochemical Industrial Park. Immediately thereafter, on August 7, senior officials from Shandong Province held a meeting in Yantai regarding the Yulong Island petrochemical integration project, setting clear requirements to ensure that the project would be approved and construction would begin by the end of the year. Subsequently, on August 19, the project took another firm step forward. The Yantai Ecology and Environment Bureau issued the \"First Public Notice on the Environmental Impact Assessment for the Reclamation Project of the Yulong Island Petrochemical Integration Project (Phase I)\” and the \"Environmental Impact Report on the Overall Plan for the Shandong Yulong Petrochemical Industrial Park\”. The speed of the action is astonishing.

The local refineries in Shandong also need to be integrated gradually