MOSCOW (MRC) -- China’s privately owned Bora Enterprise Group has started construction of a US2.5 billion petrochemicals plant in northeast China, with the steam cracker being due for start-up by mid-2020, reported HellenicShippingNews with reference to company sources.
The steam cracker marks the biggest investment yet in petrochemicals by one of China’s private refiners as the country’s so-called "teapots" look to diversify away from the saturated local fuel market.
Bora and LyondellBasell last month signed a preliminary agreement to set up a 50-50 joint venture for petrochemical projects, and are currently in talks to finalise the deal, said two Bora sources and an official at LyondellBasell.
The 18 billion yuan USD2.5 billion) complex in the city of Panjin, Liaoning province, will produce 800,000 tonnes per year (tpy) of polyethylene and 600,000 tpy of polypropylene, used to make products ranging from pipes and plastic containers to agricultural films, the sources said.
Bora is one of more than 40 independent Chinese refiners that have grown rapidly since late 2015 to account for a fifth of China’s total crude oil imports, but which are now facing threats to their survival.
Demand for gasoline and diesel in the country is slipping, while the start-up of mammoth, more efficient refineries like Hengli Petrochemical and Zhejiang Petrochemical has led to a growing supply glut.
Many are now scrambling to enter the higher margin petrochemicals sector, where China is expected to account for around 40% of global demand growth over the next decade.
Bora, which operates a 140,000 barrels per day refinery and is also a bitumen producer, was among the first to respond.
The USD2.5 billion plant was approved in 2017 by the Liaoning provincial government as a key industrial project, while Bora in June secured a 10-year, 10.8 billion yuan (USD1.5 billion) syndicated loan from Chinese banks, two company sources with direct knowledge of the matter said.
The new facilities are slated for start-up in the second quarter next year, said the two sources.
A Bora spokesperson declined comment.
“By combining the project management and construction proficiency of Bora with LyondellBasell’s technology and commercial experience, this joint venture will leverage the expertise of both companies,” Veronica Adamcik, a Houston-based spokeswoman for LyondellBasell, told Reuters.
LyondellBasell already invests in several chemical plants in China, including a joint venture with a unit of state refiner Sinopec Corp.
The Panjin complex, which LyondellBasell said is led by a 1.1 million tpy ethylene unit, will source 1.64 million tonnes of feedstock such as naphtha from the Bora refinery, but will need to procure another 1.1 million tonnes of propane or butane from the market, Bora sources said.
As MRC wrote previously, in August 2016, LyondellBasell made the final investment decision to build a high density polyethylene (HDPE) plant on the US Gulf Coast. The plant will have an annual capacity of 1.1 billion pounds (500,000 metric tons) and will be the first commercial plant to employ LyondellBasell's new proprietary Hyperzone PE technology. The start-up of the new plant is scheduled for 2019.
Ethylene and propylene are feedstocks for producing PE and PP.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,436,390 tonnes in the first eight months of 2019, up by 9% year on year. Shipments of all PE grades increased. At the same time, the PP consumption in the Russian market was 909,260 tonnes in January-August 2019, up by 10% year on year. Shipments of PP block copolymer and homopolymer PP increased.
LyondellBasell is one of the largest plastics, chemicals and refining companies in the world. Driven by its 13,000 employees around the globe, LyondellBasell produces materials and products that are key to advancing solutions to modern challenges like enhancing food safety through lightweight and flexible packaging, protecting the purity of water supplies through stronger and more versatile pipes, and improving the safety, comfort and fuel efficiency of many of the cars and trucks on the road. LyondellBasell sells products into approximately 100 countries and is the world's largest licensor of polyolefin technologies.