PetroChina pushes refinery growth

Petro-China is quietly upgrading small refineries and scouting for new sites for major greenfield plants, hoping to steal a march on more cautious rival Sinopec Corp, company officials said yesterday.

The move by China's No. 2 refiner will heat up the race for market share in the country's fast-growing retail sector, especially in the booming south, still dominated by Sinopec.

PetroChina, now running its refineries at close to 94 per cent of capacity, will add 130,000 barrels per day of new primary and secondary capacity near the eastern city of Tianjin and northern province of Shaanxi by the end of next year, officials say.

It is also considering a 160,000-bpd refinery in Guangxi province, the first major plant in the booming south, traditionally Sino-pec's turf. The project, under preliminary planning, is pending government approval, officials said.

Those plans are in addition to the major's billion-dollar, strategically located Dalian and Dushanzi projects, aimed at processing long-term crude supply from Russia and Kazakhstan. Those plants will add over 300,000 bpd of crude processing.

"To expand our refining capacity close to the consumers is our long-term strategy. We've been looking for sites at the Yangtze Delta and Pearl River Delta," said a senior PetroChina official, referring to China's two economic hot spots.

The expansionary push hints at a different corporate view than that of Sinopec, which is slowing down investment plans due to moderating demand growth in the world's No.2 oil consumer.

Both companies are also pressed by huge refining losses due to Beijing's tight price control over retail fuels, but Sinopec's pain is greater due to its heavier dependence on imported crude and its smaller domestic production.

PetroChina's 2.2 million bpd capacity represents about 36 per cent of China's total, while Sinopec has 51 per cent.

"The Sinopec slowdown is good news for us," said a second PetroChina official.

PetroChina's determination to carry on growing may also be good news for global oil consumers, who are paying record prices this year because surging demand in China and United States has strained the world's refining capacity to the limits.

The new capacity added to the three small plants Huabei, Dagang and Xianyang account for 6 per cent of PetroChina's and will process its own crude, making them more competitive than Sinopec's import-dependent plants.