Singapore — Growing appetite for crude from China's independent refiners has prompted Qingdao Port International to pursue a strategy of expanding port infrastructure to help handle excess volumes and facilitate the blending of various crude grades, according to Liu Jin, party committee member of QPI.
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The plan to expand facilities comes at a time when the independent sector is looking for ways to cut costs and handle its feedstocks more efficiently amid rising competition.
The port has plans to add a second VLCC berth with a capacity of 300,000 dwt in Dongjiakou, crude storage tanks with a total capacity of 3.6 million cu m, and a 100,000 cu m LPG tank, Liu said during the S&P Global Platts Asia Pacific Petroleum Conference in Singapore this week.
In addition, a new crude oil pipeline will be built to connect seven independent refineries, which would effectively double the number of refineries connected with pipelines from Qingdao port to 14.
"The crude transmission cost for more independent refineries will be cut once the construction finishes," he added.
Crude handling costs for those seven independent refineries, which now mainly get their feedstocks via trucks, would fall by 30%-50% after being connected with pipelines from the Qingdao port, according to Liu.
In addition to the facilities for crude oil, a new oil product pipeline will also be built, mainly to connect Qingyuan Petrochemical and Qingyinshan Petrochemical with Qingdao port, Liu added on the sidelines of the conference.
The port management has also been studying the possibility of providing its customers facilities to conduct crude blending at the port in an effort to turn it to a blending hub not only for oil products, but also for crude, a QPI source said.
Applications regarding the new business model have been submitted to the respective authorities, he added.
"We plan to make a crude supermarket here in Qingdao," he said.
QPI, consisting of Qingdao port and Dongjiakou port, handles the biggest volume of crude arrivals into China. Last year, 77 million mt of crude was imported via the ports -- about 19% of China's total, or 3.4% of the global oil trades, according to Liu's report.
Out of this, about 60% of the imports were for independent refineries in the province, according to Platts calculations.
The total storage capacity of Qingdao port and Dongjiakou port is over 10 million cu m.
The plan by QPI to expand and invest in new port infrastructure comes at a time when new greenfield refineries have come on stream.
"Hengli has been quite aggressive in selling off-spec products in May, usually at prices Yuan 500-1,000/mt ($71-$143/mt) lower than the market price," a Dongying-based refinery source said this week.
The 400,000 b/d Hengli Petrochemical (Dalian) Refinery in northeastern Liaoning province has been fully commissioned, and is designed to produce 9.8 million mt/year of gasoline, gasoil and jet fuel, according to a company source.
Besides Hengli, the 400,000 b/d Zhejiang Petrochemical in the eastern Zhejiang province hopes to be fully commissioned in the fourth quarter, which will bring another 8.5 million mt/year of gasoline, gasoil and jet fuel, a company source said Wednesday.
In addition, a new refining complex with a capacity of 800,000 b/d will be set up in Yulong Island in Yantai, Shandong province, led and coordinated by the Shandong government, according to a Shandong independent refinery.
-- Analyst Daisy Xu, email@example.com
-- Edited by Shashwat Pradhan, firstname.lastname@example.org