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China revives a $ 20 billion petrochemical project in eastern Shandong province as part of efforts to boost infrastructure spending to support an economy struggling with the fallout of the pandemic.
An oil refinery with a capacity of 400 thousand barrels per day and a plant for the production of ethylene with a capacity of 3 million tons per year were designed several years ago, but the approval of the project was delayed due to China’s struggle with excess refining capacity..
China’s state planner, the National Development and Reform Commission (NDRC), has given initial construction approvals, allowing Shandong Province to begin planning for the complex’s buildings, a source told Reuters..
Investment in the project is estimated to be nearly RMB 140 billion. Business registration data in China indicated that Shandong Nanshan Group, a privately owned aluminum smelter based in Yantai, will be the lead investor in the venture. Wanhua Chemical Group and Shandong Provincial Government will also invest in the project.
Implementation of the plans could help reduce imports of petrochemicals to China, but is likely to worsen the surplus of refined products.
Analysts expect the complex to be operational around the end of 2024, with revenues supported by petrochemicals, the demand for which is more resilient than the transport fuels hit hard by the coronavirus..
«2024 is a good entry point to the market as the global petrochemical industry begins to recover from a down cycle as a result of previous realignments», – said Harry liu, Downstream Business Consultant for IHS Markit.
The project, dubbed Yulong, will be the latest addition to China’s recent wave of private-sector petrochemical investments, leveraged by commodity giants such as BASF and Exxon Mobil..
In 2018, Yulong hired Luo Qiang, a refining veteran who previously worked with the state giant Sinopec as general manager who now leads a project team of more than 500 employees.
The project costs billions more than similar-sized factories. This is due to the fact that about 20 billion yuan of the total cost will go to finance the closure of small and inefficient factories in Shandong province to free up the territory for the Yulong plant..