China’s oil hub province of Shandong is moving forward with its new 400,000 bpd Yulong refinery, with construction expected to start this month. The project was launched in an official ceremony on October 24, along with other projects backed by the provincial government. Private aluminum producer Nanshan will control a 71% state in the refinery. Wanhua Chemical will hold a 20% stake, while local government-linked entities will own the remaining stake.
Yulong refinery will include a 3 million tons/year ethylene capacity and downstream petrochemical outputs. The 400,000 bpd first phase is expected to enter service by 2025, with an estimated investment of CNY141.6 billion ($21.1 billion). It is designed to process a blend of Saudi Arab Extra Light and Kuwaiti grade. The following phases will bring the refining capacity to 800,000 bpd by 2030.
The Shandong government has been putting in efforts to shut smaller refineries in favor of bigger integrated ones. The provincial government has threatened to shut refineries with a crude distillation capacity of less than 60,000 bpd by 2022. Refineries with less than 100,000 bpd of capacity must expand into petrochemical or be closed by 2025. This is in line with Beijing’s push to eliminate many of Shandong's independent refineries, which typically produce low-value products.
