Qingyuan Group, an independent Chinese refiner, is building a new unit in Shandong province designed to make base stocks that will be used as process oils and in lubricants.
The company said the key piece of the project is a hydrocracker being constructed at its specialty oil refinery in Yishui country, Shandong.
Our new facility will be the worlds largest for specialty oils, General Manager Cao Yonggang said at the Enmore white oil summit held in Guangzhou in early December. The hydrocracker will have capacity to process 800,000 metric tons per year of feedstock, he said. The company did not disclose the output capacity for materials produced at the facility but said that it will make rubber process oils, white oils and Group III base stocks.
The new 21,000 square meter facility is part of a massive 7.76 billion (U.S. $1.19 billion) investment and is scheduled to start operating this year.
Initially we will produce rubber filling oil and de-aromatic solvents, but eventually our goal is to serve the more lucrative, niche sectors such as cosmetics, food and pharmaceutical, Cao said.
The investment includes 3.5 billion for a pipeline connecting the new facility with Qingyuans headquarters and existing refinery in Zibo. The pipeline will be used to supply feedstock to Yishui. Qingyuan officials say the company buys more than 7 million tons of crude oil each year mainly from the Middle East.
This pipe will save us significant logistics costs, Cao said, adding that it should be completed by 2020.
Qingyuans is also constructing a white oil factory at its existing 600,000 t/y base oil plant in Zibo. Cao said that facility will make sterile white oils qualified for use in pharmaceuticals sold into foreign markets. Qingyuan is now waiting for the certification for those oils.
If approved, we could sell directly to drug manufacturers in the United States, or to Chinese manufacturers selling drugs in the U.S., Cao said.
Qingyuan already sells a small amount of white oils and base stocks outside China, but mainly in Southeast Asian countries such as Malaysia and Bangladesh.
When asked why the company is willing to invest so much in specialty oils, Cao said it is a strategy for the future growth.
Chinese lube suppliers are struggling because they all face homogeneous, sometimes vicious competition in China. Low profits limit the resources to fund R&D, which is the core competitiveness to a companys survival. So we want to serve the profitable sectors without too many rivals, he said.