China and Russia may jointly build a US$4-billion oil refinery in the northern Tianjin municipality next year to cater to the rising domestic demand, according to the local government.

A China National Petroleum Corp refinery in East China. [China Daily]

The project, developed by China National Petroleum Corp (CNPC) and Russia's OAO Rosneft, will be located in Binhai Industrial Zone. It can process 10 million tons of crude annually.

Construction of the project is scheduled to be completed in 2012, the Tianjin municipal government said on its website.

The project is part of an agreement signed by China and Russia in 2006 to expand their oil and gas production cooperation. The two parties set up a joint venture in Tianjin in 2007.

A spokesman from CNPC yesterday declined to comment on the project. The domestic media had reported that the refinery would use crude from Russia.

China and Russia signed a loans-for-oil agreement in February. Under the agreement, China will loan US$25 billion to two major Russian oil companies in return for 20 years of sustained oil supplies.

The deal includes the construction of an oil pipeline linking Russian oilfields in east Siberia with China's northeastern region. The pipeline, the first such one linking the two countries, will be in use from 2010.

Analysts said the Sino-Russian oil refinery would ease the pressure from the rising demand for refined oil in the Bohai Bay area. The region, one of China's economic powerhouses, has seen its consumption of gasoline and diesel increase rapidly in the past years.

Oil producer Sinopec is also building a giant petrochemical complex in Tianjin. The project, which includes ethylene production capacity of 1 million tons annually and oil refining capacity of over 10 million tons per year, is expected to start operations by June.

"In line with China's stimulus package for the petrochemical industry, we are now planning for more refineries in the country," an official with CNPC told China Daily yesterday, without elaborating.

CNPC's refinery in Qinzhou in the Guangxi Zhuang autonomous region, which is also the country's first giant refinery in southwestern part of China, is expected to commence operations by the end of the year, said the official who declined to be named. The project can process 10 million tons of crude oil.

The second phase of the project, which is to add another 10 million tons of oil refining capacity, is now being planned, he said.

(China Daily March 3, 2009)