Sinopec Corp’s expansion of its Guangzhou plant will be bigger than expected and start three months earlier, signalling the top refiner’s renewed confidence in China’s downstream market, company sources have stated.

The Guangzhou refinery in China’s manufacturing hub in southern Guangdong province, will start a new 160,000 barrel-per-day crude distillation unit (CDU) in May, ahead of an earlier schedule for a third-quarter launch.
The refinery will boost its crude run capacity to 270,000 barrel per day by the end of this year, rising to 300,000 barrel per day in 2007 when new secondary units are brought onstream, they said. The industry had expected the plant, now at 154,000 barrel per day capacity, to expand to 200,000 barrel per day by the end of the year.
“We have been using the 10 million tonne-per-year figure publicly, but actually we meant a capacity in that range,” said one company official familiar with the expansion.
The faster-paced and bigger expansion is a shift from Sinopec’s plan late last year to rein in capacity expansion amid slumping profit margins due to Beijing’s tight cap on domestic pump prices.
“Sinopec appears confident that refining margins will improve this year. Probably the government promised to introduce a new pricing mechanism soon,” said Yan Kefeng, Beijing-based senior analyst with Cambridge Energy Research Associates (CERA).
Beijing was widely expected to soon launch a scheme of setting its domestic pump rates by linking them to global crude instead of to oil product markets.
Partially privatised Chinese refineries suffered crushed margins last year as global crude soared about 50 percent but capped oil product prices did not rise in tandem.
Sinopec was forecast to have lost about $2.00 for every barrel of oil it refines last year, an estimate by Daiwa Institute of Research showed.