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Petrochemicals
CNOOC-Shell Petrochemicals project is located at Daya Bay, Huizhou City of Guangdong province, with a total investment of USD 4.2 billion. The joint venture partners are Shell Nanhai BV, a member of Royal Dutch/Shell Group of Companies, with a 50% stake and CNOOC Petrochemicals Investment Limited (CPIL), 50% as well. CPIL is owned by CNOOC (90%) and Guangdong Investment & Development Company (10%).
The petrochemicals complex completed construction on December 30, 2005. The core production facility is the ethylene crack plant with annual capacity of 800,000 tons. The project commenced production in March and started business operation on September 10, 2006. The project was under smooth operation throughout the past year and 1,250 employees worked in the plant.
After full production, it is capable of producing high quality and high value-added petrochemical products at 2.3 million tons per annum. Its substantial production capacity will largely replace the imported products in China and boost the development of refined petrochemicals, new materials and polyester in the Pearl River Delta.
Refining
Huizhou Refinery Project is the first large-scale downstream project solely invested by CNOOC. The Company invested around RMB 21.6 billion to build a plant with an annual capacity of 12 million tons, adjacent to the CSPCL¡¯s petrochemicals complex. The refinery was designed to process high acid heavy offshore crude, the largest single plant refinery in China and the first refinery specially designed to process high acid heavy oil in the world. It is scheduled to commission production in September 2008.
The project is composed of 16 sets of major plants and supplementary storage and transportation infrastructures, as well as ancillary facilities. It will turn out 7.3 million tons of high quality gasoline, diesel and kerosene meeting the requirement of EURO III and IV standards, 1.5 million tons of ethylene and 800,000 tons of PX per annum. Detail design for the project started in October 2006.
CNOOC will take advantage of its resources supply and build the refinery project into a clean, intelligent and high value-added world-class refinery with international competitiveness by introducing internationally advanced management practices, leading and reliable processes and environment friendly technologies.
Bitumen and Fuel Oil
CNOOC will further develop the bitumen business through a product differentiation strategy, capitalizing on its advantage on the reliable supply of heavy crude from Bohai Bay. It produced about 2 million tons of heavy traffic bitumen per annum and the Zhonghai 36-1 Heavy Traffic Bitumen has become the best brand in China, with a market share of 30%. Zhonghai 36-1 Heavy Traffic Bitumen has become a substitute of imported products and was widely used for surface pavement for highways and airports in China. CNOOC also developed other high quality products, which were used in the construction of the Three-Gorge Dam and the sports facilities of Beijing Olympic Games.
Its fuel oil has been well recognized in the market for its low sulfur content and environmental friendliness. In the last two years, the company supplied over 5 million tons of fuel oil to the domestic market each year, a market share of around 10%. It mainly supplied fuel oil to power plants, helping ease the supply shortage of electricity.
In 2006, bitumen and fuel oil sector further implemented the strategy of product differentiation and market oriented operation. The company focused on process control and management and increased its investment in research and development, and enhanced the efforts in translating technology progress into practice. It started industrial production of No. 50 Hard Bitumen and SBS Modified Bitumen. It completed the research and development of long lifespan heavy traffic bitumen for the Ministry of Communications and conducted studies and tests on adding chlorine to lubricants. A total of 10.66 million tons of crude was refined as feedstock, generating sales of RMB 44.1 billion and a net income of RMB 1.4 billion.
Bitumen and fuel oil have become a profit growth driver for CNOOC¡¯s downstream business. Through continuous introduction of advanced technology and improvement of its competitiveness, CNOOC will further move along its product differentiation strategy to become a leading producer and supplier of heavy traffic bitumen, low sulfur fuel oil and naphthene products in China in the next 3-5 years.
In 2006, China Blue Chemical Limited (China BlueChem) was successfully listed in Hong Kong, which created a new platform for international development of our fertilizer business. The key strategies for the fertilizer business are product differentiation, capital operation and cost competitiveness. It plans to develop into the biggest modern fertilizer producer with economy of scales and possess price setting leadership in the market in near future. In addition, it will actively participate in constructing a scientific fertilization system, to assist farmers to reduce cost and increase output.
Fertilizer
CNOOC has been actively developing its fertilizer business by using natural gas as feedstock, capitalizing on its advantages in resource supply and downstream experiences. China BlueChem is China¡¯s largest manufacturer of granular urea. The urea brand Fudao was marketed both in China and overseas. Fudao brand was awarded the accreditation of China¡¯s Famous Brand in 2006.
On September 29, 2006, China BlueChem shares were successfully issued at Hong Kong Exchange (Stock Code: 3983. HK), with proceeds of HK$ 3.02 billion. The listing of the company was highly recognized by international investors, with its international placing and Hong Kong public offering over-subscribed by 53 times and 478 times respectively. The stock closed at HKD 2.26 on the first trading day, increasing by 18.9% from the IPO price, and its trading volume was the highest among all stocks at the Hong Kong Stock Exchange the day. At the end of 2006, it¡¯s share price increased by 70% from the offering price.
The 600,000 tpa methanol project, the largest one in China so far, completed construction and commenced production in September 2006. China BlueChem has majority shareholding in the project. By introducing state-of-the-art technology and centralized controlling system, this project is able to achieve a high level of automation. Since it started operation, the facilities have been operating smoothly and its product quality has reached the country standard as well as the U.S. AA Grade Standard. The production of this methanol project has successfully extended the production chain of China BlueChem, and speeded up the development and utilization of natural gas resources from CNOOC¡¯s upstream business. Its products were marketed in Guangdong, Shanghai and Taiwan and helped reduce the dependence on imported methanol products in southeast coastal provinces.
In 2006, China BlueChem produced 1.93 million tons of urea and 271,000 tons of methanols. It realized total sales of RMB 3.47 billion, with income of RMB 1.09 billion, increasing by 56.69% and 8.75% compared with the previous year.
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