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Expert warns on over-expansion of oil refineries
( 2003-11-03 11:44) (Xinhua)

In the next few years, China's oil refinery expansion may lead to an over-production of oil, which will cause a huge waste of money and resources, domestic experts have warned.

Media reports show that many of China's coastal cities, including Dalian, Qingdao, Nanjing, Shanghai, Guangzhou, Fuzhou, as well as the southernmost island province of Hainan, are all enthusiastic about building or expanding their oil refineries.

In case these plans become reality, the net increase of China'soil refining capacity will reach 80 million tons, or one third of the country's overall oil refining capacity at present.

In Dalian, a port city in northeast China's Liaoning Province, two large petro-chemical companies plan to increase their capacityto 20 million tons and 10 million tons respectively.

One of the companies, the Dalian Branch of PetroChina, mapped out its expansion plan based on a proposed China-Russia petroleum pipeline project, which is still under negotiation. If the projectfails to materialize, the expanded refinery will be left useless, experts said.

"The fast development of the national economy, especially the auto industry, has seen a sharp increase in the country's oil demand, thus stimulating oil production. But blindly expanding theoil refineries will inevitably cause a great waste of resources and money," a senior official within the country's petro-chemical industry said.

"Generally speaking, oil refining is a low-profit industry, andmost international energy companies earn money mainly from the marketing sector. The cost of China's oil refineries is usually higher than that of their foreign counterparts, which leaves even less space to make profits," he said.

The coastal province of Shandong in east China is seeking central government approval for a project to construct a large oilrefinery base with a designed annual output of 10 million tons. "The project has attracted an investment of more than 1 billion US dollars and is expected to become a key motivator for local industrial restructuring." an official with the Shandong provincial government claimed.

However, the province already has more than 20 small oil refining companies in operation, that produce 16 million tons of oil products each year.

"These small oil refineries provide many jobs and also play important roles in local revenue. It takes time to have them all closed," a source with the Shandong United Petroleum Co. said.

Therefore, he said, it seems to be unwise for the local government to launch a new large oil refinery project at the very moment.

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