Re-sited Refinery       

The joint venture 15 million t/a refinery between Sinopec Group and Kuwait Petroleum Company (KPC) was finally hosted by Zhanjiang city of Guangdong province on August 10th, although another city in the province just denied the project three month ago. The project will launch on Donghai Island, 23 kilometers away from the Zhanjiang Downtown. China's biggest steel company Baogang Group Corp is constructing a RMB69 billion steel work in the same island.
   Sinopec Group plans the startup in 2013. The US$9 billion refinery brings a big cake to the Zhanjiang government. For the official, the economic index always plays the most important role in their managing record. Will the Zhanjiang citizens accept this project? It is still to wait. In the region of Zhanjiang city, Sinopec Zhanjiang Dongxing Refinery operates a 5 million t/a refinery.
   Maoming city of Guangdong also competed to host this refining project, but failed because Sinopec Group has already a big refinery there. To balance Maoming, Sinopec will start to expand its Maoming refinery this year from 13.5 million t/a to 25 million t/a.     
   On one hand, domestic industrial observers and analyst have always been criticizing the overcapacity and the related governmental departments also focus on shut down outdated capacity. On the other hand, industrial giants have never slowed down their expansion speed despite individual failure due to environment protection issues.
   When the tire producers expanded their production capacity, none of them consider how to manage the challenges of oversupply. Today they must learn to address this subject because their competitors in US intended to stop importing China-made tires. Perhaps in the future the refining operators will also face similar issue - exporting or closing.

Zhong Weike
August 20th, 2009