China’s Wanhua Chemical to hike 2020 LPG imports as world-first project starts up
China’s top petrochemical maker Wanhua Chemical Group aims to increase LPG imports to about 5.5 million mt in 2020 from 4 million mt this year as it procures feedstock from diversified sources ahead of new projects in Yantai and widens trading activities in Asia, a senior company executive told S&P Global Platts in a recent interview.
A 1 million mt/year ethylene integration project — phase two of its petrochemical project in northeast Shandong province — will be the first ethylene cracker to use LPG as feedstock globally and is set for commercial production in the second half of 2020, Wanhua Petrochemical’s associate general manager Tony Liang said. Wanhua Petrochemical is a wholly-owned subsidiary of Wanhua Chemical Group.
“The plant will use 2.2 million mt/year of LPG as feedstock and is expected to be completed by H2 2020,” Liang told Platts in a recent phone interview. Together with associated downstream units and a nearby feedstock storage rock cavern with a capacity of 1.2 million cubic meters, the project is costing around Yuan 20 billion.
To secure LPG amid ongoing trade tensions with the US, which have halted Chinese imports of US LPG due to high tariffs, Wanhua has diversified supply sources to include Australia, Africa and in particular the Middle East.
China will impose 5% additional tariffs on imports of US butane from September 1 and on US propane from December 15, the State Council’s Tariff Commission said August 23. This takes the total import tariff on each fuel to 31%, as China had imposed 26% tariffs earlier.
Liang said Wanhua has started taking FOB cargoes from Australia via spot and term contracts for use as PDH plant feedstock, amounting to about 500,000 mt/year, with companies such as BHP and Chevron. It may also look at supply from ExxonMobil, he added.
Wanhua received its first LPG cargo from the Inpex-operated Ichthys LNG project at end November last year. Five other Very Large Gas Carriers have since arrived at Chinese ports laden with cargoes from the field off northwestern Australia, according to cFlow, Platts vessel tracking software.
While Canadian LPG is a possible future supply source for household use as well as for Wanhua’s new cracker, its propane quality is currently a little unsuitable as PDH plant feedstock unless the company builds a new pretreatment unit, Liang said.
AIMS TO BOLSTER MIDDLE EAST LPG IMPORTS
Wanhua is in discussions with Middle East producers including Saudi Aramco, Qatar Petroleum, Kuwait Petroleum Corp. and Abu Dhabi National Oil Company, or ADNOC, to increase term LPG import volumes for next year to secure supply for its facilities. The negotiations are expected to be concluded by October, Liang said.
Wanhua’s current term contract with KPC comprises 10 cargoes of 44,000 mt evenly split LPG. Its contract with Saudi Aramco comprises about 440,000 mt in 10 VLGCs, while its term purchase from QP is estimated at eight to 10 cargoes.
Wanhua last November signed a 10-year FOB contract with ADNOC to import 1 million mt/year of LPG.
Building on this, Wanhua and ADNOC formed an LPG shipping joint venture that includes the operation of two VLGCs to load cargoes mainly from ADNOC, as well as from other countries, he said.
This venture will also look at downstream derivatives in the UAE including polyurethane value chain chemicals at ADNOC’s refining and chemicals hub at Ruwais, while it will explore opportunities for the development of petrochemicals and derivatives in Yantai.
“Separately, we are also putting some new shipping orders on our own and hopefully we could increase our shipping position by next year. This is a very big step,” he said.
Under this arrangement, Wanhua discusses the price of building three to four VLGCs with China’s Jiangnan shipyard, after which it will take up a long-term charter of the vessels from the shipowner, Liang said.
He said the firm was not concerned about a possible shortage of propylene due to International Maritime Organization marine fuel sulfur regulations being introduced in 2020 — which will result in low sulfur fuel oil being diverted for shipping — as it procures propylene from a variety of PDH plant, refinery and residue fluid catalytic cracker sources.