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China's ZPC to trial 2nd 200,000 b/d CDU of phase 2 plant by end-Mar: source

Highlights

To run above 100% of 800,000 b/d capacity

ZPC able to hold 47 days' feedstock inventory

Slows gas station network development

Singapore — China's private refiner Zhejiang Petroleum & Chemical is set to start trial runs at its second 200,000 b/d crude distillation unit at the 400,000 b/d phase 2 refinery by the end of March, a source with close knowledge about the matter told S&P Global Platts March 9.

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"The company targets to commence the phase II project this year, and run both the two phases at above 100% of their capacity, which will lift crude demand in 2021," the source said.

ZPC cracked 23 million mt of crude in 2020, according the the source. Platts data showed that the utilization rate of its phase 1 refinery hit as high as 130% in a few months last year.

Started construction in the second half of 2019, units of the Yuan 82.9 billion ($12.74 billion) phase 2 refinery almost mirror those in phase 1, which has two CDUs of 200,000 b/d each. But phase 1 has one 1.4 million mt/year ethylene unit while phase 2 plans to double the capacity with two ethylene units.

ZPC expects to complete construction of the secondary units by the end of first-half 2021, the source said.

The first CDU in phase 2 has been on trial run since Nov. 1, 2020. The source said its utilization rate has been gradually lifted, resulting in the three CDUs at the complex to run at average 100% in February from about 70% in the previous months.

With the commissioning of the second CDU at the phase 2 refinery, ZPC is set to double its total refining capacity to 800,000 b/d.

The complex, which is designed to crack medium sour crudes, buys feedstock from across the globe. Middle Eastern Arab Light, Arab Medium, Basrah Light, Das and Kuwait, American ANS, WTI and WTL, Norway's Johan Sverdrup and Brazilian Buzios can all be cracked by ZPC, Platts data showed.

Crude stock

ZPC's ample storage tanks help it to take advantage of crude price volatility by storing more during a contango market structure, when prices fall, the source added.

ZPC currently holds about 6 million cu m (37.74 million barrels) in crude storage tanks, equivalent to 47 days of the two plants' consumption if they run at 100% capacity.

"It is better for Chinese refineries to hold about 30 days of feedstock, despite prevailing levels of 15-20 days, because of the long distance from crude producers. For example, voyage from the Middle East takes 25-30 days," the source said.

Maximize petrochemical production

With the entire phase 2 project online, ZPC expects to lift its combined petrochemicals product yield to 71% from 65% for the phase 1 refinery, according to the source.

"Petrochemical contributes most of the companies' profit with healthy demand growth while the stakeholders have feedstock demand for their textile plants too," the source said.

ZPC has the widest flexibility on both crude slate and product slate as the newest integrated complex in China, which enables it to adjust production plans promptly in line with market changes, he said.

He added that the gas station network development has been slowed down as ZPC focuses more on petrochemicals production and sales than oil products.

Zhejiang Petroleum, a joint venture between ZPC's parent company Rongsheng Petrochemical and Zhejiang Energy Group, planned to build 700 gas stations in Zhejiang province by end-2022 as domestic retail outlets of ZPC.

Oil product exports

"With export quotas in hand, ZPC further reduces its dependency on domestic market for oil products now," the source said.

ZPC initially won 1 million mt of oil product export quota in November 2020 and exported about 850,000 mt of gasoline and gasoil last year, according to the source.

The complex exported about 300,000 mt/month of gasoline and gasoil in 2021, the source said, adding that the company also looked for opportunities to export jet fuel.

Established in 2015, ZPC is a JV between textile companies Rongsheng Petrochemical, which owns 51%, Tongkun Group, at 20%, as well as chemicals company Juhua Group, also 20%. The rest 9% stake was reported to have transferred to Saudi Aramco from the Zhejiang provincial government. But there has been no update since the agreement was signed in October 2018.