China's Biggest Teapot Refinery Seeks More Long-Term Contracts
September 08 2016 - 12:32AM
Dow Jones News
By Jenny W. Hsu
SINGAPORE--China's largest privately owned refinery, Shandong
Dongming Petrochemical, is aiming to increase its long-term
contracts in the coming years, which signals a change in buying
behavior for the main growth driver behind China's surging crude
demand.
"Our goal is to increase our long-term contracts from the
current 30% to around 70% by the year after next," said Zhang
Liucheng, the vice president and director of Dongming Group.
Presently, Dongming has contracts with BP PLC (BP.LN), Royal Dutch
Shell PLC (RDSA.LN) and Unipec.
China's independent refiners, known as teapots, have been a
vital driving force behind China's surging crude demand. In the
first half of the year, China's crude imports rose 14%, or 7.5
million barrels a day. Analysts say the teapots are solely
responsible for China's growth in crude imports.
As of mid-August, a total of 27 teapot refineries have received
or are applying for import quotas and licenses which will allow
them to buy crude directly from foreign sources. This is a
deviation from the past when they were limited to either importing
fuel oil or buying crude from state-owned companies.
Speaking at an energy conference in Singapore, Mr. Zhang said it
was entering into more long-term contracts because teapots are
expected to ramp up their refining rate to about 80% in the next
couple of years from the current 50%.
Currently, the teapots prefer crude from West Africa and Latin
America due to a lower sulfur content when compared with product
from the Middle East.
In July, Angola became China's biggest crude importer by
shipping in 4.7 million metric tons, or 1.1 million barrels a day,
a 23% jump from a year earlier.
However, this could change in the near future as at least seven
major teapots are upgrading, which will widen their refining
capability to include refined crude that is heavier more sour.
Dongming is also currently in talks with Qatar on importing
liquefied natural gas. Mr. Zhang declined to elaborate on the
timing or volume.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
September 08, 2016 00:17 ET (04:17 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
BP (NYSE:BP)
Historical Stock Chart
From Mar 2024 to Apr 2024
BP (NYSE:BP)
Historical Stock Chart
From Apr 2023 to Apr 2024