SINOPEC Corp has started its 10-million-ton-a-year Qingdao refinery in Shandong Province to help ease domestic shortages and enable China to reduce expensive fuel imports.
The project had produced 320,000 tons of refined oil products by Monday when commercial operations started after test runs, the firm's newsletter, Sinopecnews, said.
The refinery is capable of producing 7.08 million tons of refined oil products such as gasoline and diesel and 2.03 million tons of other petrochemical products annually, with sales expected to exceed 40 billion yuan (US$5.8 billion), Sinopecnews said, adding that the fuel produced will meet Euro III emission standards.
The plant will also provide 20,000 tons of refined oil products meeting the more stringent Euro IV norms to Beijing during the Olympics.
State-owned Sinopec said the US$1.8-billion refinery was losing money when it started because of capped domestic fuel prices, but it still sped up construction and started it to fulfill the company's social responsibility.
Independent refiners in China were forced to cut back capacity in the face of losses with crude oil prices surging, while demand for fuels, especially diesel, is rising as peak consumption season nears from sectors such as farming, and after the earthquake.
Net importer
Sinopecnews said the startup of the new refinery, mainly processing Saudi Arabian crude, may help China reduce expensive imports of refined oil products. China became a net gasoline importer in May for the first time after soaring crude prices discouraged domestic refinery runs.
A China International Capital Corp report said the government needs to raise fuel prices by 50 percent to boost energy efficiency and help ease inflationary pressure. China last raised retail fuel prices in November, since when crude prices have soared nearly 50 percent.
CICC said the level of global crude prices depends to a large degree on China's energy pricing policy, as the nation accounts for about 40 percent of the increase in global consumption.
If China raises fuel prices by 50 percent in mid-2008, its inflation could retreat to 7.3 percent in 2009 while, if not, that may accelerate to 8.7 percent next year, CICC said.