Sinopec Group: Expanding Its Ethylene Business

Since its establishment in 1998, Sinopec Group, China's largest
integrated energy chemical enterprise, has been sticking to the
principle of 'developing the petrochemical industry and
building core businesses' and actively promoted the development
of its ethylene business under the favorable conditions of
opportunities and industrial status. In particular in recent
years, the group helped China to be the second largest ethylene
producing country in the world by the way of importing-learning
and absorbing-integrating and innovation through giving more
attention to technology innovation, developing its
comprehensive advantages, promoting integration between
refining and chemical processes.
   During the period of 2001-2005, the ethylene production
capacity of Sinopec Group increased at an annual growth rate of
15.6%, to 5.545 million t/a in 2005 and finally reached 6.17
million t/a in 2006 after the expansion of Sinopec Maoming
Petrochemical Branch that was completed in July 2006. As a
reference number, the average ethylene producing capacity of the
company's twelve lines increased from 298 thousand t/a in 2001
to 462 thousand t/a in 2005 and 516 thousand t/a as of 2006 -
a leading position worldwide. In 2006 Sinopec Group manufactured
6.163 million tons of ethylene - 70.3% of the national total,
compared with 72.8% in 2005.

1. Adhere to the scientific development
By the end of 2006, the group completed its second round of
renovations on the ethylene crackers of its subsidiaries -  
Beijing Yanhua (450 thousand to 710 thousand), Shanghai
Petrochemical (400 thousand to 700 thousand), Yangzi
Petrochemical (40 thousand to 65 thousand), Qilu Petrochemical
(450 thousand to 720 thousand), Maoming Petrochemical (360
thousand to 1 million), Zhongyuan Ethylene (140 thousand to 180
thousand), Tianjin Petrochemical (140 thousand to 200 thousand)
and Guangzhou Petrochemical (140 thousand to 210 thousand). In
this overhaul, plenty of advanced processes and technologies
from China and abroad are applied, which has not only rapidly
expanded the production capacity of ethylene, but what is more
important, has improved quality and reduced production costs
significantly. A total of RMB24.9 billion was invested on the
five larger expansions, augmenting capacity by 1.72 million t/a.
The investment was 30% cheaper than comparable new construction.
After renovations, those crackers produced more brands of
product as well as more special-use materials, which effectively
eased the tight local supply of high quality special-use
materials.

2. Renovate the small ethylene projects
   Due to historical factors, China built eleven small ethylene
production lines, all having poor economic performance and heavy
costs. Five of these lines belong to Sinopec Group. The group
has carried out de-bottleneck renovations on the lines in
Zhongyuan Ethylene Company and Tianjin Petrochemical Company by
making use of the technologies developed by the group itself.
After renovation, the comprehensive energy consumption of the
ethylene unit in Tianjin was reduced from 700 kg oil per ton
ethylene to 640 kg oil per ton ethylene, becoming a profit-making
unit after a long period with a very unfavorable debt/equity
ratio. The unit in Zhongyuan can even manufacture around 210
thousand tons of ethylene per year at present, with a sharp
decrease of energy consumption and feedstock consumption and a
significant improvement of profit making ability.
   Before expansion, the unit in Guangzhou built in 1996 by the
Guangzhou government had a capacity of only 140 thousand t/a,
with an original investment of RMB8.4 billion. The interest on
RMB7 billion loans were a huge financial drain for Guangzhou
Petrochemical Company. In 2000 Sinopec Group acquired Guangzhou
Petrochemical Company, not only to help the company get rid of
its huge loan, but also to expand its capacity to 210 thousand
t/a. Now the group is expanding the Guangzhou unit to 1 million
t/a and plans the startup in 2008. The key success factor that
is common to all these Sinopec renovations is to save money by
using the inherent value in the old public utilities' existing
plants.

3. Cooperate with foreign giants and promote integration
When competing with international firms and facing brisk
domestic demand, Sinopec understands it must improve its
competitive edge through both its own expansion and cooperation
with foreign petrochemical giants. Hence the joint venture
crackers - the Shanghai Secco Petrochemical Company (with BP)
and BASF-YPC Company units were completed, and the
refining/ethylene project of Fujian Refining & Petrochemical
(with ExxonMobile and Aramco) has been started construction.
   In addition, Sinopec Group is constructing a pair of one
million t/a crackers - one in Tianjin and the other in Zhenhai.
Both projects integrate refining and petrochemical processing.
From the point of view of optimizing resources, integrated
projects are more suitable in times of tight crude oil supply.

4. Highlight R/D and operation policy
R/D has also been given more attention by Sinopec. The largest
cracker under operation that was developed by the group has a
capacity of 100 thousand t/a, with a localization rate of 90%.
At present 70% of the facilities in Sinopec's ethylene units were
made in China. The development of Sinopec's ethylene business
has also helped a batch of domestic equipment manufacturing
companies.
   The group, insisting on the operating policy of 'safety,
optimization, large scale businesses, cost reduction and
ever-improving competitive edge', guides the running and
management of ethylene projects after startup. Sinopec tries
hard to avoid unplanned suspension of operations, promote
long-term operation, improve operational indexes and optimize
feedstock of ethylene.
    Huge demand for ethylene continues to present opportunities
to Sinopec, helping the company play an important part in the
world's ethylene industry.