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Shandong refineries' crude imports to remain stable in 2019

China's Qingdao Port (QPI) is confident that crude imports by Shandong-based independent refiners in 2019 will remain stable from 2018, dispelling concerns that independent refiners may be slowing their operations in response to increased competition and tighter tax regulations.

The Shandong refiners were expected to slow down operations and imports next year following the start-up of two large integrated greenfield refineries, Hengli Petrochemical and Zhejiang Petrochemical, later this year. However, it is believed that the independent refineries, though smaller in size and scale, are more flexible in adapting to market changes.

To better serve the independent refineries' robust demand for crude imports, Qingdao port plans to expand its crude pipeline further to Dongying, Shandong province's refining hub. This is in addition to the start-up of the Qirun section of the Dongwei pipeline in July, which connects the refinery with Dongjiakou port.

This expansion will reduce refiner costs. The 44Kbd (2.2Mta) Qirun Petrochemical refinery has been able to lower its crude shipping cost from the QPI ports by 40%, since it began using the pipeline compared with the traditional way of shipping crude on trucks.

The Qingdao and Dongjiakou ports currently have three VLCC berths, two crude pipelines and a storage capacity totalling approx. 16MnCum. QPI also plans to construct a second VLCC berth in Dongjiakou in 2019, in an effort to boost total storage capacity to 26MnCum by end-2020.

QPI proposes to connect an additional five independent refineries to the two ports by the end of 2019, with plans to start construction work on Phase 3 of the Dongwei crude oil pipeline in October. Once completed, a total 14 independent refineries will be connected to the pipeline network from Dongjiakou.

An additional 600Kbd (30Mta) of crudes are expected to be transmitted via the network in 2020 – a third of the sector's total imports.