China asks for more oil, may cut polymer output

27 November 2007 05:33  [Source: ICIS news]

SHANGHAI (ICIS news)--Sinopec and PetroChina may reduce their polyolefin and aromatics output in December to cater to a government push to increase oil production, company sources said on Tuesday.

China has asked the two oil and petrochemical majors to beef up their gasoline and diesel output to help relieve the country’s the oil shortage since October, National Development and Reform Commission (NDRC) said on Tuesday on its website.

Subsidiaries of PetroChina and Sinopec, including Yanshan Petrochemical, Shanghai Petrochemical, Yangzi Petrochemical, Qilu Petrochemical, Maoming Petrochemical, were currently in talks with the government on details, sources close to the companies said.

Yanshan’s polymer output in November and December would be cut but the (estimated) loss of volume was yet to known, a company source said.

“According to the design of the refining and petrochemical facilities, it was estimated to lift oil production by 5-10% at most and total loss of polymers would be around 70,000-80,000 tonnes per month from PetroChina,” a source close to the company said.

China’s spot market could be tight if the government asked for reduction for more than one month,” the source added.

Industry sources said that the Sinopec’s earnings would suffer more from more-oil-less-chemical production model than PetroChina.

Sinopec's profitablity depends more on chemicals because the company's refining business was at break-even or at loss due to  high international crude oil prices and controlled retail prices of gasoline and diesel.

PetroChina, however, does not rely on chemical for profits and has a stronger crude oil business than Sinopec, they added.

Nicole Li and Sammi Yan contributed to the article.

By: Joie Xu
+65 6780 4359

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