FocusSino-Burma pipeline bodes well for China southern refineries

18 June 2009 06:50  [Source: ICIS news]

By Fanny Zhang

GUANGZHOU (ICIS news)--China’s installation of a new $2.5bn (€1.8bn) pipeline would ensure smooth flow of crude and gas to refineries being set up southwest of the country,  industry sources said on Thursday.

State-owned oil giant PetroChina, along with companies from Burma, South Korea and India, will start construction of the transnational pipeline in September this year to secure faster and safer shipment of overseas crude, they said.

“Installing such a pipeline will allow PetroChina delivering crude fast enough to its refineries there,” said Wang Jiamei, an analyst at China energy market intelligence service C1 Energy.

The Sino-Burma crude pipeline will have a transmission capacity of 20m tonnes/year or 400,000 bbls/day in the first phase of construction, with a parallel natural gas pipeline that has a 12bn cubic meters/year capacity.

The 1,100km crude line will start from Sittwe port on the west coast of Burma and enter China at the border city of Ruili. It will traverse Baoshan, Dali, Chuxiong and end at Kunming, the capital of Yunnan province, based on the preliminary plan.

PetroChina’s four refining and chemical projects in the southwestern regions should strongly benefit from the Sino-Burma crude and gas pipeline, sources said.

These projects include a 10m tonne/year refinery scheduled to go on stream in 2010 at Qinzhou, Guangxi, based on data from C1 Energy.

Its 10m tonne/year refining and chemical complex in Chengdu, Sichuang will start up two years later while preliminary works have started on its other 10m tonne/year refinery in Chongqing.

The company also has a proposal to build a 10m tonne/year refinery project in Yunnan that was pending government’s approval, according to C1 Energy data.

PetroChina mainly sources crude from the Caspian Sea through the Sino-Kazakhstan pipeline and then via railway to its refineries in the northwest and northeast.

It currently has no refineries in the southern parts of the country.

“If the pipeline starts work[ing], we can definitely benefit from that as cost will be lower,” said a source from Qinzhou refinery.

The Qinzhou refinery will mainly take in Sudan and Saudi crude through the present ocean route (via Malacca), he added.

The Sino-Burma pipeline will substantially reduce cost in shipping overseas crude from Africa and the Middle East into China, which is the world’s second-biggest oil consumer, industry sources said.  

At the same time, Burmese oil and gas will also be sent to the country via the facilities. Burma has proven crude reserves of 3.2bn barrels.

China, the world’s second biggest oil consumer, currently relies heavily on the narrow, congested and piracy-prone Malacca Straits in transporting crude, said Pang Changwei, professor at China University of Petroleum.

“The new route will shorten transportation distance [of crude] by at least 1,200km,” said Pang, adding that pipeline transportation costs less than two-thirds of ocean shipping.

China sources about 80% of its crude imports from Africa and the Middle East. It imported 57.06m tonnes of the fuel in the first four months of the year, while total crude imports in 2008 totaled 178.89m tonnes, based on statistics from the General Administration of Customs.

PetroChina, which is one of China’s three major oil companies, is in search for stable supply of low-cost crude to enhance its competitiveness as part of its long-term strategy, said C1 Energy’s Wang.

“The Middle East has abundant high-sulphur crude, which is far cheaper than sweet crude. That’s what PetroChina wants,” she said.

China's other oil majors are Sinopec and CNOOC. 

($1 = €0.72)

To discuss issues facing the chemical industry go to ICIS connect

ICIS Copyright © Reed Business Information 2009

Author: Fanny Zhang
+65 6780 4359

< previous article(ICIS Chemical Business podcast November 2, 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.