Sinochem's 1st refinery on track, cost doubles

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BEIJING, Sept 28 (Reuters) State oil trader Sinochem is quietly pushing ahead plans to build its first wholly owned refinery in China and aims to more than double the plant's capacity when Beijing liberalises its oil market, industry officials said.

Sinochem wants to start building a 100,000 barrel-per-day refinery in 2008 in Quanzhou in southeastern Fujian province to process heavy residue oil, moving forward a plan initiated two years ago. It wants to expand the facility to become a proper crude oil refinery of 240,000 bpd from 2010, they said.

The plan appears unusual, but analysts said Sinochem has well prepared it to win regulatory approval, since Beijing mostly reserves for state refiner Sinopec Corp <0386.HK> and PetroChina <0857.HK> the right to add major crude oil refining capacity.

A plant to process heavy residue or fuel oil, however, only needs nod from provincial government.

''The first phase is now under basic designing and the target for startup is 2010,'' an industry executive familiar with Sinochem's investment plans told Reuters.

Officials said the first phase alone would cost 17 billion yuan ( BEIJING, Sept 28 (Reuters) State oil trader Sinochem is quietly pushing ahead plans to build its first wholly owned refinery in China and aims to more than double the plant's capacity when Beijing liberalises its oil market, industry officials said.

Sinochem wants to start building a 100,000 barrel-per-day refinery in 2008 in Quanzhou in southeastern Fujian province to process heavy residue oil, moving forward a plan initiated two years ago. It wants to expand the facility to become a proper crude oil refinery of 240,000 bpd from 2010, they said.

The plan appears unusual, but analysts said Sinochem has well prepared it to win regulatory approval, since Beijing mostly reserves for state refiner Sinopec Corp <0386.HK> and PetroChina <0857.HK> the right to add major crude oil refining capacity.

A plant to process heavy residue or fuel oil, however, only needs nod from provincial government.

''The first phase is now under basic designing and the target for startup is 2010,'' an industry executive familiar with Sinochem's investment plans told Reuters.

Officials said the first phase alone would cost 17 billion yuan ($2.25 billion), more than double the company's initial estimates nearly two years ago. One official said the gap was due to different standards of cost evaluation.

The global refining sector is facing spiralling costs amid record high oil prices as engineering requirements and equipment become much more expensive than a few years ago. Kuwait this week approved a budget for the al-Zour refinery, the largest in the Middle East, at $14 billion, more than double previous estimates.

Sinochem, until 1993 China's monopoly oil trader, wants to establish itself as a solid No. 4 oil firm in China after Sinopec, PetroChina and offshore specialist CNOOC Ltd <0883.HK>, by building up its exploration, refining and fuel distribution arms.

Its only other refinery holding is in the 200,000 bpd West Pacific Petrochemical Corp (WEPEC) refinery in northeast China, a joint venture with French major Total and PetroChina.

But the plant is virtually controlled by PetroChina.

Sinochem now runs a separate fuel marketing team to build up the key retail network, for which the firm has formed a strategic alliance with Total, with an aim to operate hundreds of petrol stations in China.

Sinochem's Fuijian project is part of China's refinery building boom aimed at meeting an estimated annual demand growth of 5-7 percent in China, the world's second-largest oil user.

China is adding some 1.4 million bpd crude processing capacity between 2008 and 2010, nearly 20 percent of China's current consumption.

REUTERS PBB DS1540 .25 billion), more than double the company's initial estimates nearly two years ago. One official said the gap was due to different standards of cost evaluation.

The global refining sector is facing spiralling costs amid record high oil prices as engineering requirements and equipment become much more expensive than a few years ago. Kuwait this week approved a budget for the al-Zour refinery, the largest in the Middle East, at billion, more than double previous estimates.

Sinochem, until 1993 China's monopoly oil trader, wants to establish itself as a solid No. 4 oil firm in China after Sinopec, PetroChina and offshore specialist CNOOC Ltd <0883.HK>, by building up its exploration, refining and fuel distribution arms.

Its only other refinery holding is in the 200,000 bpd West Pacific Petrochemical Corp (WEPEC) refinery in northeast China, a joint venture with French major Total and PetroChina.

But the plant is virtually controlled by PetroChina.

Sinochem now runs a separate fuel marketing team to build up the key retail network, for which the firm has formed a strategic alliance with Total, with an aim to operate hundreds of petrol stations in China.

Sinochem's Fuijian project is part of China's refinery building boom aimed at meeting an estimated annual demand growth of 5-7 percent in China, the world's second-largest oil user.

China is adding some 1.4 million bpd crude processing capacity between 2008 and 2010, nearly 20 percent of China's current consumption.

REUTERS PBB DS1540

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