SINGAPORE (Reuters) - Chinese private chemical producer Hengli Group [HLGRP.UL] will receive its first cargo of Saudi crude oil by July as it prepares a new refinery for trial runs to be held in October, a source with knowledge of the matter said on Wednesday.
The 400,000 barrels-per-day (bpd) refinery in the northeastern port city of Dalian will become one of the five largest refineries in China and a major Saudi crude oil buyer. The plant is configured to process medium and heavy crude grades from Saudi Arabia.
The first cargo - 2 million spot barrels of Saudi Arab Medium crude - will be loaded in June and imported by Chinese state oil firm Sinochem Corp [SASADA.UL], said the source, who declined to be named due to company policy.
Hengli and Sinochem will officially open a joint venture trading office in June in Singapore to purchase crude for the refinery and sell oil products produced there, trade sources said.
Hengli expects to import up to 22 million barrels of crude this year for trial runs at the plant, the source said. New refineries typically take up to six months to produce fuel that meet commercial specifications and to ramp up output.
Hengli has received state approval to import 400,000 bpd of crude, but it is still waiting for the Ministry of Commerce to say how much of this quota can be used this year.
Construction of Hengli’s refinery and petrochemical complex is expected to be completed in July and trial runs would start in October, the company has said.
Hengli is also in talks with Saudi Aramco for long-term supplies, the source said. Hengli, Saudi Aramco and Sinochem did not respond to requests for comment.
Hengli is one of three companies in China bringing on new refining capacity in the fourth quarter.
Another private chemical firm, Zhejiang Ronsheng Group, is expected to start operating a new 400,000-bpd refinery in the eastern city of Zhoushan in the fourth quarter, while a 100,000-bpd expansion at China National Petroleum Corp’s (CNPC’s) Huabei refinery will also start up in October.
These refineries together will lift China’s refining capacity by nearly 10 percent and add to a domestic fuel supply glut.
Hengli started as a small chemical fiber maker and now operates the world’s largest purified terephthalic acid (PTA) plant, with a capacity of 6.6 million tonnes a year.
PTA is used for producing polyester to make synthetic fiber and water bottles.
Reporting by Florence Tan; Editing by Tom Hogue