U.S. bars PetroChina from using its new refinery to process Sudanese oil

July 5, 2010 (WASHINGTON) — PetroChina, the largest oil and gas firm in China, has scrapped plans to process Sudanese crude at its new refinery in south China under U.S. pressure, sources told Reuters.

“There is a freeze on Sudanese crude into the new plant, as it is under the U.S.-listed PetroChina, not the parent company CNPC which produces crude in Sudan,” said an industry official with direct knowledge of the issue.

Qinzhou refinery was due to become operational next August and was to mainly refine low-cost Sudan crude oil via ship and PetroChina has revamped the port to accommodate 300,0000 deadweight ton.

C1 Energy journal says that the refinery, located in Guangxi Zhuang region, is the first oil refining project of PetroChina in South China with topping capacity of 10-mil mt per year. It is equipped with 2.2-mil-mt/yr continuous reformer, 2.2-mil-mt/yr hydrocracker, 3.5-mil-mt/yr fluid catalytic cracker, etc. It is capable of producing 7-mil mt of oil products annually.

The refinery was supposed to be online last year, but was delayed for insufficient storage capacity and unfavorable domestic product oil market.

Company sources told Reuters last May that Qinzhou is geared to process mostly low sulphur crude oil with a cap on sulphur content at 0.5 percent. The new plant will also be able to process acidic grades such as Dar Blend and Nile Blend that the Chinese state oil giant is producing as an equity investor in Sudan in northeast Africa.

PetroChina started test runs last week at the 200,000 barrels-per-day refinery in Guangxi region, which borders Vietnam, the sources said.

Because of the political pressure, PetroChina has for now shifted to more West African crudes for the new plant, which is slated to enter commercial productions around the end of August.

PetroChina’s Hong Kong-based spokesman declined to comment.

It was not immediately known how the freeze on Sudan oil could be executed, as the African state is already China’s sixth-largest crude supplier, with daily exports of 252,000 barrels in the first five months of this year, as reported by official Chinese customs data

“One possible way out is for PetroChina to transfer the refinery assets to parent company CNPC,” said a second senior industry source

Washington imposed economic sanctions on Sudan in 1997 and strengthened them in subsequent years.

Foreign activity in Sudan’s oil industry has come mainly from Asian investment, while Western oil companies have been reluctant to work in the country due to U.S. sanctions and higher risks associated with the country’s instability.

China National Petroleum Corp (CNPC), Malaysia’s Petronas and India’s Oil and Natural Gas Corp (ONGC) are among the foreign oil firms in Sudan.

(ST)