Environmental concerns may delay projects in China's Bohai Bay

22 September 2011 09:47  [Source: ICIS news]

SINGAPORE (ICIS)--The development of new refineries in the Bohai Bay Economic Region may be slowed down because of government measures to ensure environmental safety, in the wake of oil spills that occurred in June, industry sources said on Thursday.

Chinese Premier Wen Jiabao recently said in a cabinet meeting that the government would regulate the construction of new petrochemical projects in the Bohai Bay region to ensure that they meet environmental protection standards. He added that the authorities would forbid land reclamation in areas where the ecological balance may be disrupted.

The oil spills that occurred at the Peng Lai 19-3 oilfield in early and mid-June have released about 700bbl of oil into the Bohai Bay and about 2,500bbl of mineral oil-based mud (MOBM) onto the seafloor as of 18 September, operator ConocoPhillips China (COPC) said.

Following Wen’s statement, sources said that environmental regulations will be tightened for new petrochemical projects, thus prolonging their completion.

“Construction progress may be affected if a project has to be redesigned or improved to meet higher environmental requirements,” said a source from oil and gas major Sinopec.

Despite the stricter governmental control, the source added that new refinery projects with capacities of more than 10m tonnes/year that are currently underway are unlikely to be halted. This is because these projects have already been designed to meet high environmental protection standards.

Sinopec is planning to build a 10m tonne/year refinery at Caofeidian in Hebei. An official from a private company that is assessing the environmental safety standards of the project said: “Environmental evaluation may take more time, because a more detailed and environment-friendly design is required.”

Sino-Russia Oriental Petrochemical has plans to build a 13m tonne/year joint venture refinery in Tianjin city. A company source declined to discuss the impact of governmental measures, but said that the “construction commencement date depends on when we will get approval from the government”.

Construction on the refinery is expected to begin in the first half of 2012 and be completed in three years, said a source close to the project.

The project was given approval in May for the use of sea areas and has passed an assessment on the environmental impact of land reclamation for the refinery, said a source with the refinery. However, it is not known when the project will be given the full go-ahead by the government, the source added.

The Caofeidian and Tianjin projects account for 15% of China’s new refining capacity over the next five years, according to C1 Energy, an ICIS service in China.

Other major projects being planned in the Bohai Bay region include a 10m tonne/year refinery to be built by PetroChina and a 20m tonne/year refinery to be built by Shaanxi Yanchang Petroleum Group, both on Dalian’s Changxing Island.

There is a possibility that plans for these two refineries, which are under preliminary feasibility studies, have risks of being scrapped, market sources said.

Additional reporting by Fanny Zhang

By: Jean Zou
+65 6780 4359

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