In visage of rising U.S. competition in the segment and getting higher local opposition to oil and gas plants over environmental concerns, Chinese major refiner Sinopec Corp is mounting back billions of dollars in petrochemical investments. In response to the sluggish economy and the poor performance of its chemical division the largest refiner of Asia and the major Chinese petrochemical manufacture Sinopec Corp. have downsize, followed by an earlier diminution in its 2014 spending budget.
In the second largest economy of the world the delay marks a rupture from two decades of growth led by the state energy majors of China which has been sited autonomy above profitability and environmental collision to look for robust demand growth. Moreover, similar steps have been taken by the rival state refiner PetroChina which is also the biggest oil and gas producers of China, freezing a USD 13 billion joint venture between Shell based in East China and another one in Guangdong with state oil company Petroleos de Venezuela SA.
In the latest mark of an extensive decelerate after a lethal pipeline blast last year threw into question whether the city is environmentally feasible for the petrochemical complex, Sinopec Corp. has held up its plans to build a USD 3.1 billion Ethylene plant located in Qingdao in East China. The explosion which had taken place last year in the month of November in the busy coastal city of Qingdao had killed nearly 62 citizens and was exposed to the danger of rambling urban development that often conflicts with industrial planning by overwhelming oil and gas infrastructure.
According to the industry experts, currently the project has been put on hold and the company is waiting for the final word from the government. Furthermore the setback on the project comes amid concern about the demand growth in the petrochemical sector of China as well as new competition from U.S. shale gas crackers which can produce ethylene at less than half the cost of the naphtha-fed crackers typical in Asia. As per the researched analyst, in the United States over the next 5 to 10 years more gas based plants are expected to start up which will include few built by Asian firms like Formosa Petrochemical Corp.
As per the industry sources, nearly 4 million tonnes of annual capacity of ethylene, key building blocks for plastics and synthetic fibres have been shelved or postponed by Sinopec and moreover potentially boosting petrochemical imports of China from companies such as SABIC which is based in Saudi and U.S. firm Dow Chemical Co.
In its first major investment in coal-based chemicals last year in the month of November, Sinopec Engineering Group which has been a newly listed unit of the Sinopec Group had agreed to build a USD 3.1 billion plant in northern China to produce olefins from methanol extracted from coal. The company also looks forward at other feedstock as well as current supply deal between Sinopec and U.S. firm Phillips 66 had recommended that from Naphtha which is a refinery oil product, the refiner is diversifying to lighter and abundant natural gas liquids to produce petrochemicals.
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