China Has New Plan for Petrochems' Development

China has mapped out a Five-Year Plan (2011-15) for the petrochemical industry that will see the country form as many as four refining bases in the coastal regions, each with a refining capacity of 20 million metric tons by the end of 2015.

The country also plans to set up three ethylene production bases, with a production capacity of 2 million metric tons each, over the same period, according to a general plan released by the Ministry of Industry and Information Technology (MIIT) on Friday.

Figures from China Petrochemical Corp, the country's biggest oil refiner, show that the country had 17 refineries with at least 10 million metric tons of refining capacity.

The MIIT plan said the nation will also raise the annual processing capacity of crude oil to 600 million metric tons by 2015, compared with 450 million tons last year.

Analysts said China will consolidate its refineries by focusing on establishing large-scale facilities and shutting down smaller units that have obsolete refining capacity. These are mainly operated by small private companies.

In addition, MIIT estimates that oil product demand will reach 320 million tons by the end of 2015, with a compound annual growth rate of 5.5 percent in five years starting from 2011.

Growth will slow from the 7.8 percent seen annually in the previous Five-Year Plan period, which ended in 2010.

Apart from the widely expected economic slowdown, both in China and globally, the decline in demand growth will be mainly caused by a weak increase in demand for gasoline, which may maintain lower demand growth in the coming years, said Lu Ying, an analyst from the oil market service provider oilgas.com.cn

Lu added that China's gasoline demand may maintain an average annual growth rate of around 3 percent to 4 percent within the five years, similar to the rate seen during the previous Five-Year Plan period.

Given slowing economic growth in 2012, diesel demand is also likely to see a weaker increase. "The major demand engine will be jet fuel," said Lu.

The market expects that China may lift its retail prices for gasoline and diesel for the first time this year sometime in April to reflect the volatile international crude oil prices.