Page 192 - 2017 White Paper
P. 192
7 White Paper on the Business Environment in China
current trajectory and“China will really threaten the world” Another PetroChina partner found itself in a similar
(Spegele 2012). predicament toward the end of 2013: a $6.4 billion gas
project being built by Chevron and PetroChina was
Unsurprisingly, however, oil continues to flow and the reported to have been delayed on more than one occasion
nation’s refining capability has grown apace. A Sinopec over disputes about the technical methods to be used in
report indicated that “Plants in China may be able to refine developing “tricky fields”. The project, Chevron’s largest
750 million metric tons of crude oil annually by the end of in China, was initially expected by PetroChina to begin
2015, compared with an estimated 507.5 million tons by operations in 2010. Four years later, it has yet to have had a
the end of [2010]” (China Daily 2010a). “first gas” date announced (Chen 2013a).
Similarly, the report noted that “The share of foreign Common delays in project openings contrast with
participation in China’s domestic refining capacity may concerns about overcapacity. In recent years China Daily
rise to 31.5 million tons annually, or 4.2 percent of the had indicated that such overcapacity in the petrochemical
nation’s total, by 2015, from the current 10.5 million tons” industry would continue to cause difficulties, and noted
(China Daily 2010a). that fluctuating oil costs on the world market have led the
government to adjust domestic costs as fast as 4 percent
The first foreign-Chinese petrochemical joint venture over 22 consecutive days (China Daily 2009a). Between the
went into operation in Fujian Province in November 2009. adoption of this pricing mechanism in 2009 and October
It is half-owned by Sinopec and the Fujian provincial 2011, authorities adjusted fuel prices 16 times, with 10 of
government, and half owned by Exxon Mobil and Saudi those adjustments being increases (Lan 2011).
Aramco, who hold 25 percent stakes each (Xinhua 2009a),
and was praised by Lin Boqiang, head of the Center of An NDRC official also notes that the pricing adjustment
China Energy Economics Research at Xiamen University, as mechanism can be used to ease inflationary pressure; the
being “a rather wise choice to encourage oil-rich countries same official furthermore indicated that a “more market-
to make more investments in China”, which can help the oriented” mechanism (to address the lack of transparency
PRC to secure (presumably strategic) oil reserves (Ibid.). and other issues with the current system) is under study
(Lan 2011).
One place to put those reserves may be an upcoming
“200,000 cubic meter oil products storage facility” in At the time of writing, the NRDC had raised (Du 2012)
Tianjin, the result of a joint venture between Royal Dutch and lowered (Xinhua 2012b) fuel prices four times each
Shell’s China-based business and the Tianjin State Farms over the course of 2012, with the last rate cut following
Agribusiness Group, noteworthy if only for a foreign two successive increases which were, according to one
company’s involvement in the project. The $87 million analyst, intended to “reduce refineries’ losses and prevent
facility is expected to begin operation in June 2013 fuel shortages, which is important to maintain steady
(Reuters 2012). economic growth” (Du 2012).
More recently, another project involving Royal Dutch Projections from the China Petroleum and Chemical
Shell—this one a $13 billion refinery and petrochemical Industry Federation projected a 5 percent slowing of
complex led by PetroChina and also including Qatar apparent oil consumption growth between 2011 and 2015
Petroleum—was put on hold. The official reason cited for due to a slowing of economic expansion and, to some
the delay was difficulty finding a suitable site to construct degree, emission-reduction efforts (Zhou 2011).
the complex; informally the “need for a massive landfill
project” costing up to $1.6 billion and “resistance from In 2011 year-on-year growth in oil consumption was
local residents concerned about worsening pollution”were reported to be at 6 percent (Zhou 2011).
both flagged as influencing the decision (Chen 2013b).
More recently, independently-owned (but not foreign-
The Zhejiang project, in which PetroChina is expected owned) ‘teapot’ refineries—so-called because of their
to hold a 51 percent stake while Shell and Qatar Petroleum small overall capacity—have been feuding with major
would each hold 24.5 percent, began in 2012 and targeted state-owned petrochemical companies over responsibility
a refining capacity of 400,000 barrels per day in addition to for a recent shortage in diesel fuel. According to Reuters,
annual ethylene output of 1.2 million tons (Chen 2013b). “state refiners had said the teapots had reduced runs or
192
current trajectory and“China will really threaten the world” Another PetroChina partner found itself in a similar
(Spegele 2012). predicament toward the end of 2013: a $6.4 billion gas
project being built by Chevron and PetroChina was
Unsurprisingly, however, oil continues to flow and the reported to have been delayed on more than one occasion
nation’s refining capability has grown apace. A Sinopec over disputes about the technical methods to be used in
report indicated that “Plants in China may be able to refine developing “tricky fields”. The project, Chevron’s largest
750 million metric tons of crude oil annually by the end of in China, was initially expected by PetroChina to begin
2015, compared with an estimated 507.5 million tons by operations in 2010. Four years later, it has yet to have had a
the end of [2010]” (China Daily 2010a). “first gas” date announced (Chen 2013a).
Similarly, the report noted that “The share of foreign Common delays in project openings contrast with
participation in China’s domestic refining capacity may concerns about overcapacity. In recent years China Daily
rise to 31.5 million tons annually, or 4.2 percent of the had indicated that such overcapacity in the petrochemical
nation’s total, by 2015, from the current 10.5 million tons” industry would continue to cause difficulties, and noted
(China Daily 2010a). that fluctuating oil costs on the world market have led the
government to adjust domestic costs as fast as 4 percent
The first foreign-Chinese petrochemical joint venture over 22 consecutive days (China Daily 2009a). Between the
went into operation in Fujian Province in November 2009. adoption of this pricing mechanism in 2009 and October
It is half-owned by Sinopec and the Fujian provincial 2011, authorities adjusted fuel prices 16 times, with 10 of
government, and half owned by Exxon Mobil and Saudi those adjustments being increases (Lan 2011).
Aramco, who hold 25 percent stakes each (Xinhua 2009a),
and was praised by Lin Boqiang, head of the Center of An NDRC official also notes that the pricing adjustment
China Energy Economics Research at Xiamen University, as mechanism can be used to ease inflationary pressure; the
being “a rather wise choice to encourage oil-rich countries same official furthermore indicated that a “more market-
to make more investments in China”, which can help the oriented” mechanism (to address the lack of transparency
PRC to secure (presumably strategic) oil reserves (Ibid.). and other issues with the current system) is under study
(Lan 2011).
One place to put those reserves may be an upcoming
“200,000 cubic meter oil products storage facility” in At the time of writing, the NRDC had raised (Du 2012)
Tianjin, the result of a joint venture between Royal Dutch and lowered (Xinhua 2012b) fuel prices four times each
Shell’s China-based business and the Tianjin State Farms over the course of 2012, with the last rate cut following
Agribusiness Group, noteworthy if only for a foreign two successive increases which were, according to one
company’s involvement in the project. The $87 million analyst, intended to “reduce refineries’ losses and prevent
facility is expected to begin operation in June 2013 fuel shortages, which is important to maintain steady
(Reuters 2012). economic growth” (Du 2012).
More recently, another project involving Royal Dutch Projections from the China Petroleum and Chemical
Shell—this one a $13 billion refinery and petrochemical Industry Federation projected a 5 percent slowing of
complex led by PetroChina and also including Qatar apparent oil consumption growth between 2011 and 2015
Petroleum—was put on hold. The official reason cited for due to a slowing of economic expansion and, to some
the delay was difficulty finding a suitable site to construct degree, emission-reduction efforts (Zhou 2011).
the complex; informally the “need for a massive landfill
project” costing up to $1.6 billion and “resistance from In 2011 year-on-year growth in oil consumption was
local residents concerned about worsening pollution”were reported to be at 6 percent (Zhou 2011).
both flagged as influencing the decision (Chen 2013b).
More recently, independently-owned (but not foreign-
The Zhejiang project, in which PetroChina is expected owned) ‘teapot’ refineries—so-called because of their
to hold a 51 percent stake while Shell and Qatar Petroleum small overall capacity—have been feuding with major
would each hold 24.5 percent, began in 2012 and targeted state-owned petrochemical companies over responsibility
a refining capacity of 400,000 barrels per day in addition to for a recent shortage in diesel fuel. According to Reuters,
annual ethylene output of 1.2 million tons (Chen 2013b). “state refiners had said the teapots had reduced runs or
192
