Demand for higher base chemicals is driving the development of mega-integrated refinery and chemical facilities in China.
Private Chinese chemical producers, including Hengli and Rong Sheng are back0ntegrating their chemical plants with refineries by building mega-integrated facilities.
In a report, Wood Mackenzie says that both these projects, which are expected to become operation in the next 12 to 24 months, are expected to add more than nine million tonnes of paraxylene capacity by 2021. This wave of Chinese investment outpaced robust demand growth for the polyester chain and as a result, the consultancy company expects the country to reduce imports for the product by more than four million tonnes by 2021.
These new sites could yield up to 45 weight % of chemicals, two to three times more than a traditional integrated site, while producing heavy crudes.
Sushant Gupta, research director, Wood Mackenzie, says: 'The Hengli and Rong Sheng projects could add up to 500,000 barrels per day of medium-to-heavy crude demand in the market when they start operation. This additional demand would further tighten the heavy crude market as we expect a shortage of heavy crude at a global level in the medium term.
'As these integrated sites are mostly configured to process Middle Eastern crude, the ongoing trade tension between China and the US is unlikely to affect the projects. US sanctions on Iran crude exports, on the other hand, could limit their crude choices.
'We expect knock-on implications on the refining and fuels markets in Asia and beyond as these projects also produce large amounts of co-products such as petrol and middle distillates (jet fuel and diesel/gasoil).'
China is expected to have a large surplus of about 780,000 b/d in middle distillates and about 500,000 b/d in petrol by 2020. About 20% and 40% of the surplus in middle distillates and petrol, respectively, comes from the Hengli and Rong Sheng projects alone.
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