CNOOC to Start New Huizhou Refinery in Q2; Plans Saudi Supply

Reuters, December 14, 2016

China National Offshore Oil Corp, or CNOOC, is expected to start operating a new refinery in southern China in the second quarter of 2017, with Saudi Arabia as the potential crude supplier, three sources familiar with the plan said on Wednesday.

The 200,000 barrels-per-day (bpd) Huizhou plant is the first new refinery addition by a state-owned energy company since early 2014, and would add to the growing fuel surplus in China as independent refiners increased their output after they were granted crude import licenses last year, pushing the country's refinery output to a record in November.

"The new plant is slated for start-up around May or June ... with a configuration geared to process medium-sour grades, typically Arab Medium from Saudi Arabia and similar grades from Kuwait," said a Beijing-based industry official.

"CNOOC has lined up a framework supply deal with (Saudi) Aramco a while ago, although parties have not fixed the volumes yet."

Such a deal, if executed, would boost Saudi's market share in the world's second-largest oil consumer in order to compete with exporters Russia and Iraq. The new 200,000-bpd plant will lift CNOOC's crude processing capacity at the site in the coastal city of Huizhou to 440,000 bpd. Spokespersons at CNOOC and Aramco did not immediately respond to requests for comments.

The upgrade also includes a new petrochemical complex with a 1 million tonne-per-year (tpy) ethylene facility due to start possibly in the second half of 2017 that will double Huizhou's ethylene capacity to 2 million tpy, said the sources. The petrochemical expansion is a 50-50 joint venture with Royal Dutch Shell. CNOOC is the parent of Hong Kong-listed offshore oil and gas producer CNOOC Ltd.

(Reporting by Chen Aizhu; Editing by Christian Schmollinger)


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