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China’s ‘Teapot’ Refineries in Shandong Adding Capacity

March 22 (Bloomberg) -- Privately owned refineries in China’s Shandong province are expanding capacity to tap rising fuel demand, an official with the local fuel-oil group said.

Total capacity of so-called teapot refineries in the eastern China province is currently at about 90 million tons a year and rising by 6 million to 7 million tons annually, Yu Yuhua, vice secretary general of the Shandong Fuel Oil Association, said today in an interview at an industry conference in Qingdao city.

Only about a third of the total capacity is operating because they face high costs for feedstock, he said. The plants’ need for imported fuel oil may stablize at about 10 million metric tons annually in the next two to three years, about the same as this year, Yu said. Chinese teapot refineries process both fuel oil and crude to gasoline and diesel and chemicals.

Sinochem Hongrun Petrochemical Co., a teapot refinery acquired by the state-owned Sinochem Corp., is adding secondary units to produce more chemical, which is more profitable than gasoline and diesel, Han Hongliang, deputy general manager of the plant, said in an interview at the conference.

The 5 million-ton-a-year plant, 51 percent owned by Sinochem, is currently operated at half of its designed capacity and imports about 2 million tons of fuel oil every year as feedstock to the refinery, Han said. Gasoline, diesel and kerosene accounts for less than 50 percent of its products, according to Han.

Shandong Chambroad Petrochemicals Co. will resume production later this month after maintenance work, which lasts for more than 20 days, is finished, Chen Shuqiang, the plant’s chemical business manager, told Bloomberg News today. The privately owned refinery, with an annual processing capacity at about 7 million tons, will be able to making a profit from processing fuel oil into gasoline and diesel, as the government increased fuel prices earlier this week, Chen said. The plant has a Singapore unit to purchase fuel oil as feedstock, Chen said, without giving annual volumes.

No teapot refineries with capacity of less than 2 million tons a year has been shut under a government rule, according to Yu with Shandong Fuel Oil Association.

A Chinese government drive to curb pollution and improve energy efficiency will shut private refineries, known as teapots, that process fuel oil into lighter products. Refineries with a capacity of less than 2 million tons a year will be shut by the end of 2013, the National Development and Reform Commission, the nation’s top economic planner, said April 26.

To contact the reporter on this story: Winnie Zhu in Shanghai at

To contact the editor responsible for this story: Alexander Kwiatkowski at

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