Shaanxi Yanchang Petroleum-China Gas JV begins building PDH plant in Taixing

Singapore — Shaanxi Yanchang Petroleum (Group) Co., Ltd., and China Gas Holdings Co., Ltd. have started construction of a propane dehydrogenation plant with a propylene production capacity of 600,000 mt/year in the Taixing Economic Development Zone on China's eastern-central coastal Jiangsu province, according to the companies and sources familiar with the project.

The Yuan 10 billion joint-venture PDH project, which will use 720,000 mt of propane as feedstock, was launched Sept. 16, the companies and sources said. The Yanchang Chimbusco Taixing Light Hydrocarbon Deep Processing Project will be constructed in two phases and take two years to complete, sources said.

The JV is investing Yuan 3.691 billion in the first phase, the companies said. The first phase comprises a 600,000 mt/year PDH plant, with no downstream units, sources said.

The second phase will add another 600,000 mt/year of propylene, taking the total propylene capacity to 1.2 million mt/year, and add 300,000 mt/year of polypropylene and downstream high value-added new materials, the companies said.

This is Yanchang Petroleum's first large-scale chemical project outside Yanchang county in northeast Shaanxi province, and is described as one of the major projects of its "Going Global" strategy.

Hong Kong-listed China Gas Holdings Ltd., a top household gas supplier in China, is making its debut into the petrochemical industry with this JV project.

EXPANSION

Propane for this project will be fully sourced from the international market, a source with knowledge of the matter said, adding that China Gas will start seeking feedstock supply next year.

China Gas currently has a term contract to lift 33,000 mt/month of propane and 11,000 mt/month of butane, or the option of a 44,000 mt/month evenly-split cargo, for delivery to Wenzhou, Nansha, Fangcheng and Taixing over July 2020-June 2021.

The group said it owns seven LPG terminals and 113 LPG distribution projects for coverage across 21 provinces, making it China's largest vertically integrated LPG business operator and services provider. China Gas plans to build another two to three terminals under its expansion plans, the source familiar with the matter said.

LPG sales totaled more than 3.827 million mt as at end March, the group said. Total revenue was HK$59.54 billion, while gross profit amounted to HK$17.1 billion, or a year-on-year rise of 21.6%.

China currently has 11 PDH plants in operation with combined propylene production capacity of 6.71 million mt/year and can use up to 8.05 million mt/year of propane as feedstock at full capacity, according to S&P Global Platts calculations.

The startup of Oriental Energy's new PDH plant in Ningbo, with propylene production capacity of 660,000 mt/year, has been delayed until H2 October. Oriental operates another PDH plant at Zhangjiagang in Jiangsu province.

Chinese PDH plants typically secure half their propane requirements via term contracts and the rest from the spot market.

These new projects come as Asian propylene prices have soared to seven-month highs due to cuts in term supply among major Chinese producers.