Price and market trends: Sinopec refineries to run at low rates for months

13 December 2013 15:03 Source:ICIS Chemical Business

Crude throughput likely falling by 20-30% after pipeline blast

China’s Sinopec may have to operate three refineries at reduced rates for months because of a crude shortfall after the permanent shutdown of a portion of the Dongying-Huangdao oil pipeline at Qingdao in Shandong province, company sources said.

Sinopec initially cut the run rates at five of its refineries, ­including two in Qingdao, following an explosion at the pipeline on 22 November that killed 62 people.

The two Qingdao-based refineries – a 100,000 bbl/day unit and a 200,000 bbl/day unit – will resume normal crude runs later this month as crude can be delivered to these units from other pipelines, market sources said.


Other pipelines can supply the refineries

Copyright: Rex Feature

The three other refineries – Sinopec Qilu’s 280,000 bbl/day unit, Sinopec Luoyang’s 160,000 bbl/day unit and Sinopec Jinan’s 160,000 bbl/day unit – primarily process piped imported crude, and are likely to see crude throughput falling by 20-30% from normal levels, market sources said.

Normal production at the three refineries was 474,000 bbl/day, which is 79% of actual capacity, industry sources said.

Sinopec is currently planning to transmit crude to the Luoyang refinery via a second pipeline between Dongying and Huangdao, with reconstruction of this older pipeline expected to be completed around 10 December, according to the source.

“We may operate our refinery at lower rates for a long time as we expect to receive only half the [usual volume of] imported crude as compared with the previous level,” a source from Sinopec Luoyang said.

Qilu refinery, which used to mainly depend on imported crude from the older Dongying-Huangdao pipeline, has to share part of the crude flows with Luoyang and Jinan refineries, a source from Sinopec Qilu told ICIS.

“We lowered crude throughput from the beginning of December and it is uncertain when the supply can resume [to] normal [levels],” the source said.

Sinopec is considering building a new pipeline to replace the shut section of the Dongying-Huangdao pipeline, the source said, but added that this could not be done in the short term.

A new oil pipeline would take several months to be completed, the source said, citing the need for planning, designing and securing regulatory approvals for the project.

Moreover, China’s environmental authorities in late August suspended approvals on all Sinopec projects except those for fuel upgrading and emissions cuts, as the company failed an emission-cut appraisal for 2012.

Its Jinan refinery mainly processes local Shengli crude at present, said a company source.

By Jean Zou