Sinopec continues to entrust Shandong with refining and processing
Following the fourth quarter of last year, Sinopec and other major oil companies have continued to commission local refineries in Shandong Province to process crude oil, subsequently purchasing the resulting gasoline and diesel. This practice remains active today.
Liu Aiying, chairman of the Shandong Petrochemical Industry Association, revealed this information to the *First Financial Daily* during the "China Petroleum Market Summit." She explained that Sinopec currently pays around 2,000 yuan per ton for processing, meaning it pays 6,500 yuan per ton for crude oil and sells the refined products at 8,500 yuan per ton.
In the second half of last year, some regions faced a tight supply of refined oil, but Shandong avoided an actual shortage due to its local refining capacity. This situation also occurred in Shandong earlier this year. Although the commissioning of gasoline and diesel was paused in the fourth quarter of last year, it has resumed recently.
According to Liu, Sinopec commissioned approximately 700,000 tons of crude oil in the second quarter of this year, with 1.05 million tons processed in July and about 500,000 tons in August. PetroChina also has several hundred thousand tons of similar volume.
While this amount is not significantly larger than the total crude oil processed by local refineries in Shandong, it still represents a meaningful opportunity for them.
Before 2000, China had over 200 local oil refineries nationwide, including 40 in Shandong. After restructuring, the number of national local refineries dropped to 82, with 21 remaining in Shandong. Local companies value this opportunity greatly, investing in better refining equipment and training personnel extensively.
Currently, the total refining capacity of local refineries in Shandong reaches 45 million tons per year. However, actual processing volumes in 2006 and 2007 were only 21 million and 23 million tons respectively, and this level has remained roughly the same in recent years—considered very low.
Liu noted that the country allocates less than 2 million tons of crude oil annually to local refineries, so most of their raw materials come from imported fuel oil.
Additionally, CNOOC may sign cooperation agreements with two local companies in Shandong. In January, CNOOC, Shandong Province, and Dongying City signed a strategic cooperation framework agreement focusing on integrating local refining enterprises.
Two companies, Shida Technology and Shandong Hengyuan, are making progress, though success is not yet guaranteed. Their combined refining capacity exceeds 4 million tons per year.
CNOOC has successfully acquired or formed joint ventures with companies such as China Shipping Asphalt Co., Ltd., CNOOC Daxie Petrochemical Co., Ltd., and China National Offshore Oil and Gas (Taizhou) Co., Ltd., with a total refining and chemical capacity of 10.7 million tons per year.
However, some companies have not reached agreements, and others that had discussions have already terminated talks due to conflicting interests, according to a source from a marketing department of a CNOOC-affiliated refinery.
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