“Teapot” refineries expand capacity to survive

Since Beijing ordered the closure in 1999 of so-called “teapot” refineries, which have a refining capacity of one million tons a year or less, some refineries such as those in Shandong Province have responded by expanding capacity to survive. According to Zhao Youshan, an official with China’s General Chamber of Commerce, Shandong’s local refineries will exceed 80 million metric tons in refining capacity in 2011. Included in this group are the Huaxing Group, which will add a six million-ton-per-year atmospheric and vacuum distillation unit, the Zhenghe Group, which is adding a five million-ton-per-year unit, the Shandong Haihua Group, which is upgrading its five million-ton-per-year unit, and Hongrun Petrochemical, which is adding a five million-ton-per-year heavy oil unit. By expanding their capacity, these private refineries can then attract more capital and form new partnerships. The Shandong refineries are confident they will be able to attract investment, as they are more profit driven and have more flexible management than state-owned refineries. (May 23, 2011)