Cao Xianghong, an academician of the Chinese Academy of Engineering and former vice president of Sinochem Group, recently voiced significant concerns about the rapid expansion of large-scale oil and petrochemical projects in China during the just-concluded China Petroleum and Chemicals Academic Annual Meeting. In an interview with reporters on December 5th, he stressed that hasty and unbalanced decision-making based solely on economic scale can lead to severe consequences. According to Cao, a thorough and comprehensive evaluation of a project’s competitiveness is essential before any major investment is made.
He pointed out that most of the crude oil required for newly built refining and petrochemical projects in China relies heavily on imports, while global oil supplies are becoming increasingly strained. Many large-scale refineries planned for construction before and after 2010 may face crude oil shortages within 15 years. The worsening global supply situation means that new refineries must be flexible in processing different types of crude and integrate refining with chemical production. Future refining capacity growth will mainly meet the demand for vehicle fuels, but the rising need for chemical raw materials will further complicate the situation. Meanwhile, environmental pressures are pushing petrochemical companies to upgrade their products and adopt cleaner production methods.
Cao also highlighted the challenge posed by the Middle East's growing ethylene production capacity, which reached 27 million tons by 2010. Most of this capacity uses cheap natural gas by-products like ethane and light hydrocarbons, posing a serious threat to China’s naphtha-based ethylene industry.
To address these issues, Cao suggested that new projects should first conduct a detailed and comprehensive analysis of their competitive advantages, avoiding the trap of pursuing only large-scale single-unit projects. For example, while large polyolefin units may be efficient when producing fewer product varieties, smaller and medium-sized units offer better flexibility in responding to market changes and brand adjustments. Additionally, large-scale refinery projects must secure stable crude oil supplies through strategic partnerships, long-term contracts, and even involving suppliers as investors.
He also emphasized the importance of optimizing the layout of refining companies and maintaining integration between refining and chemical industries. Furthermore, with rising electricity demand, the coal supply-demand gap in China is expected to widen. While coal-to-methanol and dimethyl ether could serve as alternative fuels, they involve complex safety, environmental, and logistical challenges, leading to high social operating costs. These alternatives require careful control and cannot be rushed. Achieving long-term stable operation is no easy task. Therefore, coal-to-liquids projects should be developed as model factories, not as mass production initiatives.
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