Ethylene production capacity is expected to rise from its current level of 9 million tons to 14 million tons by 2010. Yet this increase would satisfy only half of the country's demands. Given ethylene's importance as a product increasingly in demand, and its close ties to the national economy and people's daily lives, it is not surprising that ethylene market demands have attracted both Chinese and foreign petrochemical firms seeking to strengthen their presence in China.
Ethylene and its products provide raw materials for a wide array of consumer goods, home appliances and textiles, including color televisions, refrigerators, laundry machines, clothing, toys, shoes, and even vehicles. As a major exporter of home appliances and textiles, China generates an increasingly high demand for ethylene to increase production capacity in processing and manufacturing industries. Government statistics show that, between 1990 and 2003, China's ethylene consumption volume increased by and average of 12% per year. China's production capacity has increased from 620,000 tons in 1983 to 7.875 million tons in 2005, exceeding Japan's production and placing China second behind the United States as the world's top ethylene producer. China's annual production capacity is expected to rise to 9 million tons in 2006.
Sinopec, China National Petroleum Corporation (CNPC) and China National Offshore Oil Corporation (CNOOC) have strengthened their investments in the ethylene industry. Over the past five years, Sinopec has increased its production capacity by 15.6% per year. In September 2006, it commenced operation of its new ethylene production entity, increasing the total annual production capacity at Sinopec Maoming Petrochemical Company to one million tons. The five reconstruction projects at Yanshan, Yangzhi, Shanghai, Maoming, and Qilu required a total investment of 24.9 billion yuan (US3.11 million).
CNPC is also strengthening its ethylene input and output, formally launching its ethylene project in February, 2006. With investments totaling 21.2 billion Yuan (US$265 million), the project is expected to reach an annual output of 800,000 tons. In November of 2006, CNPC Lanzhou Petroleum Chemical Industrial Co. launched its ethylene expansion project, with an expected annual output of 700,000 tons.
In addition to exporting ethylene products to China, foreign petrochemical giants, including Shell, BP, Exxon Mobil, BASF Group, Saudi Arabian Oil and Dow Chemical have entered the market by establishing joint ventures and strategic partnerships with Chinese petrochemical firms. BASF Group jointly invested with Yangzhi Petrochemical in a project expecting to yield 700,000 tons annually, while BP and Shanghai Petrochemical seek to establish an ethylene project that would see 900,000 t/a. Shell and CNOOC plan to join together on a project in the South Sea yielding 800,000 tons annually, and while Exxon Mobil has joined Fujian Petrochemical Limited in a project to produce 600,000 t/a, it has also signed on for an oil refining and ethylene reconstruction project with Guangzhou Petrochemical to expand its ethylene output to 1 million t/a.
Yet, while production capacity is on the road to expansion, China's ethylene sufficiency rate has fallen from 78% in 1990 to 43% in 2005. And this is only one of several notable structural contradictions plaguing the industry. Industry experts have pointed out that ethylene products made in China tend to be mid- and low-grade, with limited variety. The industry's overall competitiveness is not high, with major technological and economic indexes far below international averages. China's ethylene equipment saw an average 27% increase in general energy consumption, and its life cycle is only 50% of equipment that meets international standards. A manager in the technical development department at Sinope said that the industry's biggest problem is that it still has a long way to go in research and development.Mainland companies that fully employ foreign technologies at their production facilities demonstrate this. Tianjin LG Dagu Chemical Co., Ltd recently inked an agreement with Shaw, Stone and Webster to introduce the latter's patented technologies, stimulants and infrastructure designs in its 500,000 t/a ethylene project.
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