OilVoice - China To Build New Pipeline By 2011

China To Build New Pipeline By 2011

Thursday, December 03, 2009

State behemoth, the China National Petroleum Corporation (CNPC) is planning to construct a crude oil pipeline that will stretch across the province of Shandong in eastern China, carrying up to 200,000 barrels per day (bpd). According to reports in a CNPC-owned newspaper, the 462km pipeline is scheduled to cost CNY2bn (US$293mn) and to come onstream in June 2011.

The new pipeline will link the seaport of Rizhao in the East of Shandong province with the county of Dongming, near the city of Heze, in the West of the province. The pipeline is reported to have a capacity of 200,000 bpd in its first phase. A second phase is intended to bring the capacity up to 400,000 bpd, although the time frame on the expansion as yet remains unclear. CNPC's pipeline project will be undertaken in partnership with Heze-based independent refiner Shandong Dongming Petrochem Group (SDPC). The two companies had been reportedly in talks considering co-operating on the pipeline project since 2007.

Shandong Dongming Petrochem has been elected to host the oil receiving terminal for the pipeline. Similar to the pipeline, the company has a refining capacity of 200,000 bpd. At such point when the pipeline capacity is doubled to 400,000 bpd, the additional volumes could supply an additional planned 200,000 bpd refinery. CNPC general manager Jiang Jiemin announced plans for the second refinery back in May of this year. The additional refinery is set to be built in the city of Shangqiu, in Henan, around 135km to the south of Dongming. Back in September of this year, CNPC was busy arranging the refinery's environmental impact assessment, the final procedure before applying to the relevant regulatory body, the National Development and Reform Commission, to get the 'go ahead' for the project. This application shows just how far along the project is, quashing doubts over the refinery's location - it will indeed be in Shangqiu.

The Rizhao to Dongming crude oil pipeline is in keeping with CNPC's strategy of enhancing its oil and gas transport and distribution infrastructure in China. The energy-hungry nation is building such infrastructure to decrease its reliance upon its aging nautical oil transportation network that is currently the favoured method of use. In addition, CNPC is increasing its involvement in a region previously dominated by other companies, including China Petroleum & Chemical Corporation (Sinopec), which owns refineries in both Henan and Shandong provinces.