South China Market Structure Changes After Units’ Operation
Overview: On April 15, 2019, a group of SCI analysts conducted a seven-day field visit in South China. By virtue of Fujian Gulei Petrochemical Base and Guangdong Huizhou Petrochemical Base, the petrochemical industry in South China drew high attention of the whole industry.
Previously, the downstream units of aromatics in South China didn’t develop perfectly. However, by means of diversified development, East China has become the largest net demand area for aromatics. With the rebuilding and expansion of CNOOC Huizhou Refinery Phase II Project in recent years, 10,000kt/a oil refining and 100,000kt/a ethylene units will be newly added, which will increase the total crude oil processing capacity and ethylene capacity to 22,000kt/a and 2,400kt/a respectively. Additionally, the capacity expansion at Sinopec Quanzhou Petrochemical and Sinopec Hainan Refinery will usher in new changes to South China.
1. Changes in South China market structure brought by the periodical projects
1.1 The regional competitiveness in South China has increased significantly. “Three pillars” prompt the modern petrochemical industry system.
CNOOC Huizhou Refinery Phase II went into production in 2017. The capacity doubled when the project finished, with the oil refining and ethylene capacity reaching 22,000kt/a and 2,400kt/a respectively.
In mid-2018, CNOOC and Shell Petrochemical Phase II newly added a 1,200kt/a ethylene unit, which doubled the capacity at CNOOC and Shell Petrochemical. High-quality and diversified petrochemical products are supplied to the market each year by CNOOC and Shell Petrochemical, which better meets the growing demand for high-end petrochemical products in South China and even the whole country and further reduces China’s external dependence on ethylene as well as alleviates China’s petrochemical industry structural contradiction. Sinopec Maoming Company also expanded the capacity of catalytic reforming unit. Therefore, the three projects greatly increase the whole petrochemical industry level in South China.
In South China, Sinopec, CNOOC and Sinochem form a situation of “three pillars”.
Taking benzene as an example, according to SCI statistics, the capacity in South China (Fujian included) is 2,460kt/a, taking up 19% of the total. The quantity of enterprises is 12, occupying 13% of the total. The average benzene capacity of each enterprise is 210kt/a. The benzene capacity over 400kt/a in South China accounts for 22.2% of China’s total benzene capacity over 400kt/a.
1.3 The downstream matched units are continuously put into operation, improving the balance of the supply and demand.
SCI visited Fujian Shen Yuanxin Material Co., Ltd. whose cyclohexanone and caprolactam capacity is 200kt/a and 400kt/a respectively. The cyclohexanone and caprolactam capacity at Fujian Yongrong Science and Technology is 200kt/a and 200kt/a respectively. These two companies become the leading enterprises in recent years.
Taking benzene as an example, in 2018, the import volume accounted for 91% in East China, and that only occupied 2% in South China.
According to SCI, in South China, the benzene capacity is 2,460kt/a, and the theoretical consumption volume of downstream industries was around 2,420kt. The theoretical demand gap in East China and North China was 8,120kt and 6,580kt respectively. On the whole, the balance of supply and demand in South China is better than that in other regions.
2. Changes in South China market structure brought by the refining and chemical integrated projects
2.1 Seven world-class industrial bases are put into construction, raising north-south competition.
Hengli Petrochemical led the construction of the industrial bases, followed by Zhejiang Petrochemical and Sinopec Zhenhai Refining & Chemical Company. At present, Hengli Petrochemical has produced qualified benzene resources which are sold to the downstream plants in East China.
The capacity at the seven petrochemical bases is predicted to take up 40% of China’s total capacity by 2025. Therein, located in the Pan-Pearl River Delta region, Guangzhou Huizhou and Fujian Zhangzhou Gulei petrochemical bases are the core place for China to implement the “Belt and Road Initiative” strategy. According to SCI’s rough statistics, the newly added capacity in South China will reach 71,000kt/a by 2022 and take up about 35% of the total.
2.2 To improve the industrial chain
Huizhou Dayawan Petrochemical Industry Park has established a complete industrial chain involving in the upstream oil refining industry, the midstream ethylene industry and downstream C2, C3,C4, etc. industries. Moreover, the local conversion rate of chemical products reaches 71%, and the correlation of circular economy industrial chain in the park reaches 85%. These lay a solid foundation to establish a world-class petrochemical area.
2.3 Promising future development
1. As seen from China’s refining industry layout planning, South China isthe significant development area in the future. First, the Pan-Pearl River Delta region is a developed region of the national manufacturing industry. Thus, it is beneficial for petrochemical bases located in this region to save the logistics costs. Second, South China is crucial for the “Belt and Road Initiative” strategy and Maritime Silk Road. Third, South China is closer to the Middle East oil producing areas, which is conducive to national security. Fourth, adjacent to Hong Kong and Macao, it will contribute to investment and regional prosperity in South China.
2. In South China, the refining and chemical integration industrial cluster is gradually forming, which is conducive to centralized management and large-scale operation.
3. The economy is developed in South China, and there is almost no geographical discrimination. These provide a good regional cultural atmosphere to refining and chemical enterprises and downstream enterprises.
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