By Chen Aizhu and Shu Zhang
SINGAPORE (Reuters) - China Sinochem Group is expected to start up a new crude processing unit and a petrochemical complex in southeastern China around mid-2020, marking the state firm's first foray into making petrochemicals, three company sources said.
The state-run oil and chemicals group is adding 60,000 barrels per day of crude processing capacity at an existing 240,000-bpd refinery in Quanzhou, Fujian province.
It will also begin operations around June of a petrochemical plant, including a naphtha cracker that can produce one million tonnes per year (tpy) of ethylene, the sources said.
The expansion is part of a new wave of investments in China, led by private chemical giants Hengli Petrochemical (SS:600346) and Zhejiang Rongsheng Holdings, that have boosted output of petrochemicals such as paraxylene (PX), the key raw material for synthetic fibre and water bottles. China is the world's largest petrochemical importer.
The Quanzhou refinery additions will come on top of some 900,000 bpd of refining capacity added during 2019 in China, nearly 8% of national total refinery throughput, that swelled China's fuel glut and spurred record product exports.
The 32.5 billion yuan (£3.5 billion) investment is a pivotal part of Sinochem's growth strategy. The state group is seeking a multi-billion-dollar stock listing for its energy department, and believes petrochemicals can add value to its dominant refining and oil trading business.
Sinochem plans to process light crude oil at the new 60,000-bpd crude distillation unit to make naphtha for the cracker. The existing refinery units process mainly heavier grades, according to the three sources, who declined to be named as they are not authorized to speak to the press.
"The company is looking to start the new refining and ethylene facilities around May/June," said one of the sources.
Wood Group (L:WG), the service contractor building the facilities, said on its website last month it was conducting safety and quality checks as construction was near completion.
Sinochem did not respond to a request for comment.
Since its start-up in 2014 - the existing 240,000-bpd Quanzhou plant, Sinochem's single fully-owned refinery - has been a leading contributor of revenue and profits to the group's energy business, which for decades has been dependent on the international trading of oil and chemicals.
Sinochem is also expected to start operating towards the fourth quarter an 800,000-tpy PX unit, according to Bian Chenhui, an analyst with Chinese consultancy JLC Technology Network who closely follows China's PX expansions.