Sinopec Manages to Form Shandong Fuel Oil Association
"Local" Refineries Concern Regrouping   

Shandong Fuel Oil Association conducted by Sinopec Group was established in Jinan, the capital of Shandong province, on January 28th. The forthcoming uniform supply of oil products by Sinopec to "local" refineries (not owned by Sinopec, CNPC or CNOOC) in Shandong has received widespread applause.
    As Qingdao Refinery constructed by Sinopec will soon start functioning, (CCR2008 No. 2) the move has other implications. Frictions with local refineries in Shandong happened at the time when Sinopec decided to construct a refinery in Qingdao, Shandong province. Objection mainly came from ChemChina (China National Chemical Corporation), one of the top five chemical companies in China. (CCR2004 No. 29) Sinopec and ChemChina are in good terms once again later and construction on Qingdao Refinery is therefore in smooth progress. Nevertheless, two key figures of Qingdao Refinery (Qingdao Mayor Du Shicheng and Sinopec President Chen Tonghai) are put under investigation today.
   When CNOOC (China National Offshore Oil Corporation) is pending to regroup local refineries in Shandong, Sinopec comes out to support the development of the local refineries in Shandong.
   "The demand for fuel oil in Shandong is around 22 million tons a year, accounting for more than a half of the national total," said Mr. Sun Fuyong, the executive of Shandong Fuel Oil Association. Mr. Sun was in charge of the fuel oil business in Sinopec. "The association will organize member enterprises to hold business and trade talks with agencies of Russia, Venezuela, Brazil and Columbia, achieve the effective distribution of oil and fuel oil resources in Shandong and avoid the chaos in market and the high cost in terminal users caused by multi-layer operation and multi-layer functioning."
   The new association will get crude oil through the coordination between Shandong and oil supply countries and through the swap of resources. Due to the short of supply of crude oil, the operating rate of local refineries in Shandong is less than 30% today. The capacity of local refineries has already reached 45 million t/a.
    Shandong province is the domain of Sinopec and crude oil is also supplied by Sinopec. Both sides have however been in competition for long years. In the past one month or two months the relationship between them has suddenly become intimate.
   In early December 2007 Sinopec urgently dispatched 500 000 tons of crude oil to Shandong. It was the first time for Sinopec to supply additional crude oil to local refineries in Shandong beyond a plan.
   Analysts point out that it has a bearing to the recent moves taken by CNOOC and CNPC (China National Petroleum Corporation) in Shandong.
   In December 2007 CNOOC signed a cooperation agreement with Shandong Provincial Government and Shandong Dongying Municipal Government. CNOOC and Shandong will have all-round cooperation in major projects and oil/gas sales networks. One important aspect of the cooperation is the integration of local refineries in Shandong. The region for the integration of refineries to be made by CNOOC is exactly the location of Shengli Oilfield, an important oil base of Sinopec in Shandong.
   CNPC plans to construct a new 10 million t/a refinery on the Moye Island of Weihai, Shandong. (CCR2007 No. 36)