Cao Xianghong, an academician of the Chinese Academy of Engineering and former vice president of Sinochem Group, expressed deep concern during the recent China Petroleum and Chemicals Academic Annual Meeting about the rapid expansion of large-scale oil and petrochemical projects across China. In a press interview on December 5th, he highlighted the serious risks associated with hasty and unbalanced decision-making in such projects. According to Cao, a thorough and comprehensive evaluation of a project's competitiveness should be the foundation for any major investment.
He pointed out that many newly built oil refining and petrochemical projects in China rely almost entirely on imported crude oil, while global oil resources are becoming increasingly scarce. He warned that large-scale refineries planned before and after 2010 might face crude oil shortages within 15 years. The world’s oil supply is expected to continue declining, and without flexibility in crude processing and integration between refining and chemical industries, new refineries will struggle to remain viable. Additionally, future refining capacity growth is likely to focus more on meeting the demand for vehicle fuels, which could conflict with rising needs for chemical raw materials.
With growing environmental concerns, China’s petrochemical companies are also under pressure to upgrade their products and adopt cleaner production methods. Meanwhile, the Middle East is set to reach an ethylene production capacity of 27 million tons by 2010, with 80% of its facilities using cheap natural gas byproducts like ethane and light hydrocarbons. This poses a significant challenge to China’s ethylene industry, which mainly relies on naphtha as a feedstock.
Cao emphasized that new projects must conduct a detailed and comprehensive analysis of their competitiveness, avoiding the blind pursuit of large-scale single-unit projects. For instance, while large polyolefin plants may be competitive when producing fewer product varieties, smaller and medium-sized units offer better flexibility in responding to market changes and adjusting brand strategies. He also recommended that large refinery projects should secure stable crude oil supplies through strategic partnerships, long-term contracts, and even involving crude suppliers as investors.
Moreover, he suggested optimizing the layout of refining companies and maintaining the integration of refining and chemical development. He also stressed the importance of managing coal-to-methanol and dimethyl ether as alternative fuels for vehicles, noting that these technologies require extensive support in safety, environmental protection, distribution, and storage, leading to high social operating costs. These challenges must be carefully managed, as achieving long-term stable operations is no easy task. Therefore, coal-to-liquids projects should be developed as model factories rather than being rushed into mass production.
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