Sinopec merges two Guangdong-based refineries, lifts more U.S. oil

SINGAPORE (Reuters) - China’s Sinopec Corp has merged two subsidiary refineries in Guangdong, two company sources said, as the state refining giant looks to improve operations in the face of rising competition in South China.

FILE PHOTO: A man stands next to a logo of Sinopec, or China Petroleum and Chemical Corporation, at an expo on rubber technology in Shanghai, China September 19, 2018. REUTERS/Stringer

The company in July combined the newly launched Zhongke refinery complex and a neighbouring old plant Dongxing Petrochemical, both based in the coastal city of Zhanjiang, and named the merged entity Zhongke Refining and Chemical Co.

Guangdong province is China’s top oil-consuming region. Sinopec alone operates nearly 1 million barrels per day (bpd) of refining capacity in the province and rival PetroChina is building a new 400,000 bpd refinery.

“It’s part of Sinopec’s strategy to form regional refining hubs so to be more integrated into feedstock supply and crude oil purchases,” said one Sinopec official.

Both sources declined to be named due to company policy. Sinopec did not immediately respond to a request for comment.

The new entity has a crude refining capacity of 300,000 bpd and is due to start a new 800,000 tonne per year ethylene complex in September at the Zhongke plant.

The older Dongxing plant, which operates a 100,000-bpd crude unit, has since 2017 become China’s leading processor of U.S. crude oil, mostly of low sulfur quality that fits the plant’s configuration, said a second official.

Between 2017 and 2019, Dongxing processed about 15 million barrels of West Texas Intermediate crude, replacing some of its previous regular imports from West Africa.

After a lull in U.S. oil imports in 2019 due to souring relations with Washington, China since earlier this year has resumed U.S. oil purchases following the Phase 1 trade deal agreed in January.

Dongxing is slated to receive 1 million barrels of WTI crude each month between June and October, the second source said.

WTI crude typically gives a high yield of naphtha, a feedstock needed for the start-up of the Zhongke ethylene plant.

Reporting by Chen Aizhu; Editing by Aditya Soni