Petrochemicals: still in the spotlight

The 2nd Annual Oil Refinery and Petrochemical Summit was held
by Lnoppen in Beijing from June 28th to 29th, 2007. Attendees
from Shell, BASF, CNPC and Sinopec Group shared their excellent
opinions and viewpoints at the summit.
   A researcher of the National Development and Reform
Commission at a petrochemical summit held in Shanghai on June
30th predicted that China will consume 350 million tons of crude
oil in 2007 - an annual growth of 8%. Due to a deficit in local
supplies, China is spending more and more to buy crude oil. Local
refineries include Sinopec Group and CNPC face increased
pressure from the climbing price of crude oil, the researcher
commented. Another expert expressed concern about the short
supply of LPG, forecasting that China will consume 25 million
to 30 million tons of LPG in 2010.
   Recently the most noteworthy event may be that Chen Tonghai,
General Manager of Sinopec Group and Chairman of the Board of
Directors of Sinopec Corp., resigned his position on June 22nd.
He had led the company in position for four years. The official
announcement reported that Chen's resignation was due to his
private life. A rumor claims that Chen has been investigated by
the National Audit Office PRC. It is strange that on June 22nd
Chen was unexpectedly called out of an international training
summit and his resignation was announced just a few hours later.
Shareholders of Sinopec Corp., in particular Hong Kong investors,
expressed their dismay - their investments were seriously
damaged by such a sudden and nontransparent change in a high
management position.
   A source close to Sinopec Group disclosed that the Qingdao
Refining project of Sinopec is being investigated by the
National Audit Office because the investment in this project is
in disarray. However there is no official explanation yet.
   Sinopec Corp. plans to refine 156 million tons of crude oil
this year - a 6.6% increase - and will increase profits by 60%.
A high manager commented that the refining business will remain
profitable as long as the crude oil price is lower than US$60
per barrel.
   In the first five months China imported a total of 67.43
million tons of crude oil, an increase of 9.6%, and manufactured
77.51 million tons of crude - an annual growth of 1.7%. So the
total supply increased 5.22% year on year.
   One month ago, local private oil products companies jointly
considered selling their businesses to foreign companies
because they suffered more from market pressures than Sinopec.
Now there are no further reports about these negotiations.


Zhong Weike
July 5th, 2007