China’s Hengli Petrochemical seeks spot crude as it looks to raise run rates

China’s 400,000 b/d Hengli Petrochemical (Dalian) Refinery is looking for spot crude cargoes from the Middle East on top of its term supplies from Saudi Arabia in order to meet its throughput plan for 2019, company officials told S&P Global Platts this week.

“The term deal for Saudi crudes is not enough as we are lifting crude runs, so we need to buy other grades for supplement, mainly from the Middle East,” a company source said.
“We’ll receive around four to five VLCC crude cargoes per month from May,” he added.

This volume, about 8-10 million barrels/month, equals to 64-80 million barrels in May-December this year.

Hengli signed a long-term contract with Saudi Aramco in late 2018 to secure 130,000 b/d of supplies in 2019, with three VLCC cargoes of Arab Medium and Arab Heavy under the term contract having arrived so far this year, according to company sources and cFlow, Platts trade flow software.

The refiner was likely to take more than eight VLCC cargoes, or 16 million barrels of crude oil, rest of the year on top of its term contract with Aramco, Platts estimated.

Hengli Petrochemical is one of the largest refining and petrochemical projects that started operations in China in recent months, and will add to the country’s crude oil demand and petrochemical production volumes.

The source said that the refiner will not consider US crudes for the time being, but buying condensate from Australia as feedstock could be an option in the future.

RAMPING UP RUN RATES

Hengli Petrochemical has been running at around 85% capacity this week, and will lift the run rates of its two crude distillation units further from mid-May, according to the source.

“We have lifted runs from around 69% in early April to around 80% in late April,” said the source.

The company aims to process around 1.3 million-1.4 million mt of crudes in May, and around 1.7 million mt/month from later this month.

Hengli Petrochemical started trial operations on December 15, when crude oil was first fed into the refinery’s No. 1 CDU.

Their No.1 CDU was subsequently suspended after the trial run and then restarted again on March 15, followed by the restart of its No.2 CDU at the end of March.

Each CDU has a capacity of 10 million mt/year, or 200,000 b/d.

PRODUCTS SALE VIA SINOPEC

Hengli signed a sales agreement with Sinopec under which Sinopec will be responsible for all the petrochemical sales, while oil product sales will also be handled by it, according to another source with the company.

The company has already started to sell gasoil in the market, while for gasoline, they would first sell components instead of finished gasoline, the source said.

As for jet fuel, the company is still in the process of getting a certification from the Civil Aviation Administration of China, which will take some time due to the complex requirements, he added.

“We still hope to be allocated with the export quotas, but it could take a bit longer,” the source said.

Hengli’s refinery was designed to produce about 4.6 million mt/year of gasoline, 1.6 million mt/year of gasoil, and 3.6 million mt/year of jet fuel, it told Platts previously.
Source: Platts