Nov. 25 (Bloomberg) -- China Petroleum & Chemical Corp., Asia’s largest refiner, said operations at its “super-large” production complex in Qingdao will be disrupted after a crude pipeline leak and blast that killed at least 55 people.
The 10 million metric-ton-a-year facility will have “some disruptions,” Lv Dapeng, a Beijing-based spokesman for the company known as Sinopec, said in a phone interview yesterday, without giving further details. The explosion occurred after oil leaked from the pipeline into Qingdao’s municipal rainwater network. Xinhua News Agency, which reported the death toll, said 136 people are injured and nine are missing. Operations at Sinopec’s Qilu and Luoyang refineries were also affected, ICIS C1 said, citing unidentified plant officials.
The incident is the latest in a string of fatal industrial accidents as China seeks to improve workplace safety. In June, a fire at a poultry plant in the northeastern province of Jilin killed 120 people in the nation’s deadliest blaze in 13 years. Chinese President Xi Jinping visited relatives of people killed and injured in the Qingdao blast, China National Radio reported. Sinopec will cooperate with the government on a probe into the accident, the company said today in a statement to the Shanghai Stock Exchange.
“The disruption should be regional and temporary, and won’t have long-lasting impact to Sinopec operations across the board,” said Shi Yan, an analyst at UOB-Kay Hian Ltd., said by phone from Shanghai. “Sinopec may have to invest a huge amount of money to improve pipeline security later on, which may raise their capital spending on projects that do not generate profits.”
Sinopec’s refining and petrochemical site at Qingdao in Shandong province produces more than 7 million tons of gasoline, kerosene and diesel a year, according to the company’s website. Refined products are sold in the north, northeast and southeastern coastal regions of China, and are also exported, according to the website.
Shares of Sinopec fell as much as 3.4 percent to HK$6.77 in Hong Kong and were at HK$6.82 as of 3:54 p.m. Its Shanghai-traded stock declined 4 percent to 4.85 yuan.
The company will maintain normal fuel supplies to customers in the region from its other plants, Lv said. Sinopec operates a refining and chemical facility in Shandong province at Zibo, more than 130 miles (210 kilometers) west of Qingdao. The refinery can process 10.5 million tons a year, according to the company’s website.
“At this stage, the company’s main task is to avoid further accidents by checking if there’s more gas combustible within the rescue zone,” Lv said by phone yesterday, adding that the spillage of oil is under control. The company is still investigating the cause of the leak, he said.
The 249-kilometer Donghuang II pipeline, which Sinopec shut following the leak, has a capacity of 10 million tons a year, according to the company. That’s about 200,000 barrels a day. It primarily ships crude from the Shengli oilfield to Huangdao port, Lv said.
While crude imports to the Qingdao refinery will be disrupted, the plant will not be shut completely because it still has some oil and fuel inventories, according to Lv. The complex also produces liquefied petroleum gas, polypropylene and styrene, with a total output of more than 2 million tons a year, according to the website.
“All local oil pipelines were shut due to the leak,” Jean Zou, an oil analyst with ICIS-C1, a consultant, said by phone from Guangzhou. “Production at surrounding refineries was disrupted. Refineries are worried whole plants could be shut if the accident worsens.”
Six oil vessels, including two supertankers with capacity of 300,000 tons, were ordered for safety reasons to depart from berthing facilities at Qingdao port, according to a press release by the municipal government yesterday. The port had the capacity to handle about 30 million tons of oil a year as of 2009, the government’s website showed. It was the fifth-busiest container port in the country, according to October data from the Ministry of Transport.
Port operations are running smoothly, according to a spokesman for Qingdao Port Group Co., who asked not to be identified when contacted by phone yesterday. The leak spread across 3,000 square meters in Jiaozhou Bay and the Yellow Sea, the Qingdao Municipal People’s Government Information Office said on its microblog.
China this month pledged to allow more private investment in state-controlled industries as part of the biggest package of reforms since the 1990s.
The country will improve work safety and “learn lessons” from the blast, China Central Television reported Xi as saying. The accident investigation should be fast-tracked and responsibility established, Xi said.
China uses its big three oil companies, including Sinopec, to control domestic fuel prices and secure energy supplies from overseas to meet the burgeoning needs of an economy that expanded 7.7 percent last year.
Sinopec reported a profit increase in the third quarter as a new policy helped it and PetroChina Co. to raise fuel prices, foreshadowing the government’s plan to reduce state intervention in the economy.
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