UPDATE 1-China's CNOOC Hizhou petchem plant wants U.S. LPG as feedstock

Mon Aug 18, 2014 8:02am EDT

(Adds details, context)

HONG KONG Aug 18 (Reuters) - A new Chinese petrochemical plant plans to use rising exports of U.S. liquefied petroleum gas (LPG), part of the shale boom, as a cost-saving feedstock, joining other plants on China's east coast.

The second phase of Chinese energy giant CNOOC Group's $8 billion petrochemical complex in the southern city of Huizhou intends to use U.S. LPG, a senior executive of the multi-billion dollar project's contractor said on Monday.

"The petrochemical project will use U.S. LPG as a raw material," said Yan Shaochun, executive officer and chief executive officer of Sinopec Engineering, which is involved in the design of the project, told Reuters on the sidelines of his company's interim results briefing.

He declined to elaborate, but noted that several petrochemical projects along China's coast had already started using U.S. LPG.

China, the world's second largest economy, is increasingly looking at using LPG as a raw material for petrochemical production due to cheaper pricing and sometimes limited supply of the traditional feedstock naphtha, produced from crude oil.

China is the biggest consumer of LPG, a compressed mix of propane and butane that was previously mainly used for heating and transport. It has lined up about 100,000 bpd of long-term U.S. LPG imports with supplies mostly starting in 2015-16, traders said.

China's first purchases of U.S. LPG were made last year, amounting to 3,530 barrels per day, according to Chinese customs' data, in deals done by little known private firms.

Earlier this year, Sinopec Corp , Asia's largest refiner, struck a deal to buy LPG from U.S. refining company Phillips 66 for delivery from 2016.

China's total LPG imports could reach half-a-million bpd by 2020, up nearly four-fold from last year and overtaking other key Asian importers such as Singapore and Indonesia, they said.

CNOOC group, parent of China's largest offshore oil producer CNOOC Ltd , is spending $8 billion to expand its refining and petrochemical complex in Huizhou, near Hong Kong. The second phase of the project calls for the construction of a 200,000-barrels-per-day refinery and a 1 million-tonne-per-year ethylene plant on top of its existing 240,000-bpd refinery and 800,000-tpy ethylene plant.

The design of the second-phase project is almost completed, and construction is ready to begin in the second half of this year, said executives of Sinopec Engineering, a unit of Sinopec Group, parent of Sinopec Corp. (Reporting by Charlie Zhu in Hong Kong and Judy Hua and Aizhu Chen in Beijing, editing by David Evans amd William Hardy)