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PetroChina & Venezuela Talks Oil Refinery & Upgrader – Orimulsion use still on China table?

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This topic contains 4 replies, has 2 voices, and was last updated by  Charles Randall 12 years, 6 months ago.

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  • #3646

    Charles Randall
    Participant

    PetroChina, Venezuela Are in Talks Over Oil Refinery (Update1)

    By Wang Ying
    May 6, 2008 (Bloomberg) — PetroChina Co., the nation’s biggest oil producer, said it is in talks with a Venezuelan partner about a plan to build a refinery in China’s southern province of Guangdong. PetroChina may sign an initial agreement in Venezuela this week, Vice President Shen Diancheng said in Beijing today. The refinery will have annual capacity of 20 million tons, about 400,000 barrels a day, he said.
    Chinese oil refiners are expanding capacity to meet rising fuel demand in the world’s fastest-growing major economy. The plant would use orimulsion, an alternative boiler fuel, derived from Venezuela’s bitumen deposits. PetroChina and Venezuela may also agree to explore jointly for the fuel in the South American country, Shen said.
    “The two sides are still selecting a site for the refinery,” Shen said. Chinese Vice Premier Hui Liangyu will visit Venezuela on May 8, he said, without giving further details.
    The countries signed $11 billion of energy and transportation accords in August 2006 when President Hugo Chavez visited China. China will invest $2 billion in Venezuela’s oil industry, including developing the Junin oilfield, in which PetroChina parent China National Petroleum Corp., has an interest, Chavez said at the time.
    PetroChina is also in talks with Qatar to build a refinery in the eastern province of Zhejiang, Shen said today, without elaboration. Orimulsion, a replacement for fuel oil to burn in power plants, is derived from the bitumen that occurs naturally in Venezuela’s Orinoco belt. It is changed to a mixture of 70 percent bitumen and 30 percent water for transportation by tanker.
    To contact the reporter on this story: Wang Ying in Beijing at ywang30@bloomberg.net. Last Updated: May 6, 2008 04:40 EDT

  • #6874

    Charles Randall
    Participant

    Update:  The new China refineries & Venezuela exploration seem to link or come back to Chinese plants using Orimulsion? Before PDVSA hiked price oil in Orimulsion from $1/B to $17/B and closed down most Orimulsion operations & sales. However, China continued with building of several power plants to use it, and stayed in negotiations with PDVSA.  The $11 billion Energy & Transport 2006, purchase 300 MBD by China and perhaps these new refineries & exploration / development Junin field – Upgrader are extended negotiations around getting Chavez failed commitment for Orimulsion back on track for China power plants.
     
    Also could be back up for the Junin field upgrader – this is field PDVSA is developing for Petrobras JV Refinery in north Brazil and Petrobras was to supply half the crude from its own offshore fields…..and it just made huge find that was twice the size (potentially) of the Tupri field that was to supply its new refinery.
    Regards

  • #6873

    Charles Randall
    Participant

    <This version news PC/PDVSA gives more details on Orimulsion aspects/background – CER>
     
    PetroChina to Ink New Orimulsion Deal Venezuela

    May 6, 2008 BEIJING: PetroChina said on Tuesday it will sign a framework deal with Venezuela this week to jointly explore for orimulsion fuel in the Latin American nation and build a new refinery to process the heavy oil in China.

    This follows more than a year of negotiations as the Chinese oil major sought compensation after Caracas forfeited a long-term supply pact of the heavy boiler fuel.

    PetroChina’s vice president, Shen Diancheng, said the firm and state-run PDVSA now plan to build a 400,000 barrel-per-day plant to process orimulsion in southern Guangdong province. He did not give further details on the scale of the investment, or the equity split.

    “We want to cooperate with foreign firms in both upstream and downstream business to take advantage of our respective strength and secure steady oil supplies,” Shen told an industry seminar in Beijing.

    He also said the firm was in talks with Qatar to build a refining and petrochemical complex in eastern Zhejiang province, without giving details.

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  • #6872

    Anonymous

    Isn’t China too far away ?

  • #6871

    Charles Randall
    Participant

    China too far away = relative term.  It is freight & time disadvantaged to the European, US Gulf & Venezuelan markets but  often the comparative price of energy (oil, diesel/gasoline, coal & petcoke ect) is priced higher than these markets to absorb some of that differential. China is about 30-40 days away from the US Gulf & Venezuela which are only 14 days away from Europe markets. However the US West Coast is only 14-16 days away from China.  Although we like to talk about freight cost in terms of $/ton or $/Bbl – it is usually priced by shipowners in terms of $200,000/day capes & $100,000/day panamex (for example at 2007 peak market price on larger vessels).  The cost also incude fuel adjustment factors when Bunker markets (like today) are way outside normal averages.
     
    Having said this remember Heavy Fuel Oil & Bunkers for ships and power plants are often priced off Conventional Crude Oil prices (historical averages are in 70-80% Crude price) so having a Bitumen Crude source like Venezuela that has more than the 20% or  $20/Bbl or more discount for heavy conventional sour crudes (Maya & Oman) off marker/index crudes like Brent, WTI (probably Dubai or Tapis for China)  would also help reduce differentials.
     
    Additionally Orimulsion is about 40-50% water so economically this would mean China could avoid half the transportation cost on barrel of orimulsion by making it in thier plant. This in addition to gaining the PDVSA/Bitor technology for making Orimulsion would be a large interest for China that also has Bitumen reserves in at least 9 of its 14 crude oil fields and future use implications now that it has passed point of domestic production covering use & must import crude to meet demands.
    Since China Refinery complexity averages in 4-7 range except for new coastal world scale Refinery/Petchem complex’s – it is not currently in position for meeting higher consumption rates (ie above the 330 MBD contracted now) that PDVSA needs to offset falling demand from US partners & market (ie Citgo stations) it has alienated with its policies & rehtoric. Since it takes over 3 years to get fuel oil coking unit in place and both PDVSA/China currently lack the Heavy Oil technology application for Suncor/COP/XOM/Total/Chevron & other majors – Orimulsion would help with short term consumption application that could be adapted to asphalt, coker feedstock or fuels at later date.  Hope this helps – like always coker answers are in shades of gray with posibilities on both sides of the issue.
    Regards
     
     
     
     

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