China private refiner spends big on petrochemicals
China’s privately owned Bora Enterprise Group has started construction of a $2.5 billion petrochemicals plant in northeast China as it looks to finalize a planned joint venture with LyondellBasell Industries, company sources said. The steam cracker, which is due for start-up by mid-2020, 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 finalize the deal, said two Bora sources and an official at LyondellBasell.
The 18 billion yuan ($2.5 billion) complex in the city of Panjin, Liaoning province, will produce 800,000 tons 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 startup of mammoth, more efficient refineries such as Hengli Petrochemical and Zhejiang Petrochemical has led to a supply glut. Many are now scrambling to enter the higher margin petrochemicals sector, where China is expected to account for around 40 percent of global demand growth. Bora, which operates a 140,000 barrels per day refinery and is also a bitumen producer, was among the first to respond.
The $2.5 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 syndicated loan from Chinese banks, two company sources said.