Pipe networks to ease railway pressure
By Xie Ye (China Daily)
Updated: 2004-06-14 10:29

Chinese oil companies are looking to pipeline networks to deliver more of their refined products, a move that will reduce transportation costs and alleviate the pressure on the nation's fragile rail system.

China National Petroleum Corp (CNPC), the country's largest oil producer, is drafting plans to invest more than 10 billion yuan (US$1.21 billion) to build long pipelines in northern and western China to consolidate its grip in the regions.

Rival China Petrochemical Corp (Sinopec), the second-largest oil company, is building trunk lines in the south where it is dominant.

CNPC will quadruple its oil pipeline length to 9,200 kilometres by 2010, up from 2002's 2,300 kilometres.

Sinopec, which is building a 1,700-kilometre pipeline in southwestern China, also plans to construct a 1,000-kilometre network in South China's Guangdong Province this year.

At present, about 70 per cent of China's oil products such as petrol and diesel are delivered from refineries to markets vial rail.

The oil firms are eager to shift more of their products into pipelines as transportation costs are about 45 per cent less than when using rail.

By laying pipeline networks, the groups also hope to tighten their grips on their markets. The move would also be a huge benefit to China's already tight rail transport system. The railways are struggling to carry more coal and grain.

There are few pipelines available in China to deliver oil products, including a 1,200-kilometre Lanzhou-Chengdu-Chongqing pipeline which links Lanzhou in northwestern China's Gansu Province to Chengdu in Sichuan Province and Chongqing Municipality.

Only 3 per cent of China's oil products are carried via pipelines, compared with 80 per cent in other countries.

"Using pipelines is an international practice and will become a trend in China," said a CNPC sales manager, who would not reveal his name.

"In other countries they seldom transport oil products via rail. Using pipelines is cheaper and there is less ullage.

"More importantly, it helps increase CNPC's income, as we don't need to pay the transport industry."

Upon the completion of its pipeline expansion plan, CNPC will increase its annual transportation of oil products via pipelines to 30 million tons by 2010, up from the current 5 million tons.

Pipelines are expected to be used to move 30 per cent of all products, up from 7 per cent at present.

This would slash transport costs by 1.2 billion yuan (US$145.1 million) a year, according to the company.

At the core of the plan are several major links, including a 1,800-kilometre Urumqi-Lanzhou pipeline, a Lanzhou-Xi'an-Zhengzhou line in the northwest, a Zhengzhou-Wuhan-Changsha line in Central China, a Dagang-Jinan line in Shandong Province in the east, and a Jinzhou-Beijing-Shijiazhuang-Zhengzhou line, which would cover the nation's north and northeast.

Construction of the Urumqi-Lanzhou pipeline, which will be able to carry up to 10 million tons of oil products annually, is scheduled to start by the end of the year.

Sinopec is building a 1,700-kilometre pipeline - linking markets in Guangdong, Guizhou and Yunan provinces and the Guangxi Zhuang Autonomous Region - in southwestern China.

Upon completion by the end of the year, the pipeline will be able to deliver 6 million tons of products a year from Sinopec's Maoming refinery to the four markets.

The capacity will further increase to 10 million tons by 2012 when another refinery in Beihai starts supplying the pipeline.

"The southwest pipes will improve Sinopec's market network and increase our competitiveness," said Sinopec President Wang Jiming.

Close