Yanchang Petroleum Joins Hands with CNPC to Build 1 Million Tons of Ethylene Project

China's largest local oil company, Shaanxi Yanchang Petroleum (Group) Co., Ltd. (hereinafter referred to as “Extension Oil”), will equip the oil group to build a 1 million-ton ethylene plant with a total investment of 23 billion yuan.

For a long time, the extension of oil in the field of mining and refining has been "a single combat." In today's situation where oil prices are low and the oilfields have reached the end of their mining period, joint efforts with PetroChina will compensate for the shortcomings of prolonged oil and seek new profit growth points for it.

Has been reported to the Development and Reform Commission

According to CBN reporters' exclusive understanding, the new factory will be located in Yan'an City, Shaanxi Province. The Shaanxi Provincial Government has officially signed a cooperation agreement with CNPC. At present, the two parties have jointly reported to the National Development and Reform Commission the approval application documents for the project and the preparation of the preliminary feasibility report.

However, the proportion of joint ventures and the mode of cooperation between the two sides are still unclear.

A person from the Yanan Development and Reform Commission office told the CBN reporter: “The project is in the charge of the province, and the settlement area will probably be in the Yangshu Chemical New District.” According to public information, the chemical park will use 1 million tons of ethylene as a leader and build 9 Downstream chemical projects.

Except Sinopec, PetroChina, and CNOOC, the three major central enterprises, Yanchang Petroleum is the only local oil company with oil and natural gas exploration and development qualifications and is affiliated with the Shaanxi Provincial People's Government. In 2008, it achieved a sales income of 62.2 billion yuan, a profit of 10 billion yuan, and now employs 78,000 people.

Yanchang Petroleum has undergone two rounds of restructuring in 1998 and 2005. Its core asset is the Yanchang Oilfield Co., Ltd. (hereinafter referred to as the “oilfield share”) under the group company. It has always been an important taxpayer in Shaanxi. In 2007, taxes on oilfield shares amounted to 1.92 billion yuan.

The extension of the oil field stock management is also one of the central government's acquisition targets. A person close to the top of the China National Petroleum Group told CBN reporter: CNPC hoped to win the oil and mineral assets many years ago, but Shaanxi Province has a firm attitude and has therefore failed to do so.

"This cooperation will bring benefits to the extension of oil to open up downstream businesses," said Liu Chuanjun, an analyst at CBI.com.

Extend the mining area has a hundred years of mining history. A management person in charge of exploration and development of Sinopec told reporters that this kind of life can not be easy to produce oil, reducing production is inevitable. In addition, it belongs to the Ordos [13.54 0.15%] basin, where Changqing Oilfield, a large oil field of PetroChina, has already existed, and it is impossible for the extended oil ore to expand outwardly.

Make up short board

One of the problems is mining difficulties. Low oil prices also pose challenges to the company's crude oil production revenue.

The company has revealed that, according to the original local reorganization agreement, the extension of oil to pay 1 ton of crude oil to be paid to the local about 550 yuan.

Yesterday, the sales price of crude oil in major domestic oilfields was about US$47/barrel (about RMB2,240/ton), and at this price, 550 yuan/ton accounted for about one-fourth of the income of the extended oil crude oil. Therefore, the lower the oil price, the greater the pressure on the extended revenue.

Moreover, there is no gas station for the extension of petroleum, and the refined oil produced by its subordinate refineries needs to be sold on behalf of the two major oil companies. The annual volume of finished oil sold by China National Petroleum Corporation is approximately 1.1 million tons.

Under the influence of these factors, prolonging the oil business will face great challenges and it will need to find new profit growth points.

Zhang Jiyao, general manager of Yanchang Petroleum, once stated that of the investment of 30 billion yuan for extending oil in 2009, 10.4 billion yuan will be spent on exploration and development of oil fields, and most of the rest will be placed on chemical projects.

Different from the dense ethylene distribution in East China and South China, Northwestern Shaanxi, Shanxi and Gansu Provinces do not have a large-scale ethylene plant with a capacity of 1 million tons, except that PetroChina’s Lanzhou Petrochemical has 600,000 tons/year ethylene plants.

The industry also has different opinions on whether ethylene production is happening at the right time. China National Petroleum Corporation [11.67 0.69%] and one person from the Chemical Industry Association stated that China may not approve too many ethylene projects, and there are already many projects in various regions. The Middle East also uses its cheap production costs to increase the production of ethylene, and global ethylene faces a surplus.