Understanding and Puzzling   

Recently China's fourth biggest petroleum group Shaanxi Yanchang Petroleum (Group) Co Ltd announced its plan of building three refining and chemical projects in Changxing Island of Dalian, Liaoning province by signing an accord with the Dalian government on October 9th. (CCR2010 No.20) The plan is subject to approval by the National Development and Reform Commission. Reportedly, Shaanxi Yanchang will construct a big refinery, a heavy oil cracking unit and a methanol to olefin plant there, which will spend more than RMB10 billion in total. In spite of huge investment, more puzzling voice is why the company selects Dalian where is already home to PetroChina's 20.5 million t/a refinery and WEPEC's 10 million t/a refinery. Once completion, Shannxi Yanchang's new refinery will be faced with a situation of overcapacity. Some experts predicted that China's refining capacity expansion will lead to surplus in 2013.
   Oil products users are glad to see the join in of Shaanxi Yangchang in the domestic supply, which will help to break out the monopoly of Sinopec Corp, PetroChina Company Limited and CNOOC. Sinopec understands that Shaanxi Yangchang wants to extend its production chain from petroleum exploration in order to compete with top three refining companies in all dimensions. Technical designers think that Shaanxi Yanchang wants to beat out smaller refining companies by bigger capacity and competes with old refineries by updated technologies. Politicians may guess that the Dalian government wants to create more jobs for its citizens. Environmental protection players started to consider which will bring about less impact on environment - letting several small refineries remain operating or constructing a big refinery to replace them. N.S.Venkataraman from India advised how he understands that the capacity buildup for some chemicals in China is even much more than the present global demand and even the projected growth in the next few years.       
   On October 18th China's ethylene manufacturing companies held their annum conference in Tianjin to discuss the industrial situation at present. The expert team for the conference called for promotion of locally developed technologies and equipment and optimization of existing crackers. They welcome the competition from the Mideast, which will help the Chinese ethylene makers to upgrade their production mix.     
   Economist, future dealers, chemical players and house buyers in China are inquiring what drove the prices of any commodities to surge in the past few months, - much more money, expectation on the appreciation of RMB against US dollars or governmental policy's control on industries with high energy consuming and pollution? Anyhow, all predictors are saying that CPI growth in China will climb up.


By Zhong Weike