Sinopec Maoming Refinery to Use More Iran Oil in 2013
China's biggest refiner Sinopec Corp will process more Iranian crude at its second-largest plant in 2013 than in 2012, a Sinopec official said, but sees no problem finding insurance for the Maoming refinery.
Insurers have refused to cover Indian refineries that process Iranian crude imports due to Western sanctions, raising concerns other Asian buyers may face a similar snag. The lack of insurance cover means Indian refiners are set to halt Iranian imports.
Europe and the United States last year imposed tough new sanctions aimed at Iran's oil trade to force Tehran to the negotiating table over its nuclear programme.
There was no sign yet of insurance problems for Sinopec's 400,000 barrels per day (bpd) Maoming plant, Yu Xizhi, president of Sinopec Maoming Petrochemical Corp (SMPC), told Reuters in an interview. Sinopec's Beijing headquarters handles plant insurance under a single umbrella, he added.
Maoming would import its full contract volumes in 2013, he said. That would be higher than in 2012, when the refinery reduced imports in line with other Sinopec refineries, Yu said.
"We have followed the government's requirement to maximise our import volume from Iran (this year)," Yu said last week on the sidelines of China's annual parliament meeting.
"After all, China and Iran enjoy good relations."
Yu declined to say if other Sinopec refineries would also increase processing of Iranian crude. A Sinopec spokesman said he was unable to comment on the company's crude purchase plan.
Should Sinopec increase imports of Iranian crude, China would be in violation of U.S. sanctions. However, industry sources do not expect a rise and have said China is likely to reduce imports by a further 5 to 10% in 2013 from 2012.
Sinopec is Iran's biggest crude buyer but cut imports in 2012 after a contract dispute and due to shipping problems caused by the sanctions. China bought 21% less crude in 2012 than 2011 from Iran, importing around 440,000 bpd.
The U.S. last year slapped its toughest sanctions yet on Iran, requiring Iranian crude buyers to reduce imports or face exclusion from the U.S. financial system.
China is Iran's biggest trade partner and has voiced opposition to unilateral sanctions imposed outside the framework of the United Nations. But the world's second-largest oil consumer qualified for a U.S. exception to its sanctions anyway as imports fell.
Sinopec refineries process almost all the crude that China buys from Iran. In 2011, Iran's contracted crude sales to China were 518,000 bpd. Actual imports were a little higher at 555,000 bpd.
Yu declined to detail the volume his refinery would import. An industry source estimated that the plant would process about 60,000 bpd of Iranian crude this year. Sinopec's top refinery, Zhenhai Refining and Chemical Corp, processes around 200,000 bpd Iranian oil.
After an expansion and upgrade last year, Maoming now has five crude distillation units (CDUs), with a capacity to process 500,000 bpd, Yu said. Secondary units can process 400,000 bpd.
The refinery plans to process just 340,000 bpd of crude this year, up from 290,000 bpd last year, as it will shut for a full overhaul for over a month around October, he said.
Sinopec is building a new 200,000 bpd crude pipeline to link the refinery to a terminal able to berth a Very Large Crude Carrier (VLCC) in nearby Zhanjiang city. The pipeline is slated to start operation in early 2014, Yu said.
As part of the industry's push for cleaner fuels, Maoming invested more than 1.0 billion yuan ($161 million) in fuel upgrade units over the past two years.
The refinery has already started offering supply of a cleaner grade of gasoline known as national IV to the booming export and manufacturing Pearl River Delta in Guangdong.