Chinese petrochemical companies should gird for new challenges in three years, triggered by cost-competitive products flooding in from overseas, especially Middle East countries.

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This advice was highlighted by company executives and association leaders during a discussion on the sidelines of a petrochemical conference organized by the China Petroleum and Chemical Industry Association on Friday.

"We believe the demand for petrochemical products will remain robust this year, given the fast development of the country's manufacturing industry. Therefore, we are confident of this year's business turnover. However, the situation will not last long and may change after 2010," said Xu Weihui, president of Sinochem International Corporation.

China's petrochemical industry may face a difficult time after 2010 because of imports of low-cost and scale-produced petrochemicals from refineries and crackers located in the Middle East.

"The capacity of Middle Eastern refineries and crackers will further increase in three years and by that time, their petrochemical products will boast an obvious cost and price advantage," Xu said.

Chinese petrochemical companies have no other option, but to enhance their technological capabilities and improve their administration to cope with the future competition, according to Pan Derun, vice-chairman of China Petroleum and Chemical Industry Association.

"Chinese petrochemical firms will not be able to compete with their Middle Eastern counterparts on cost and price. Middle East countries have access to cheap crude oil and their refining capacity will reach peak levels by 2010. The only way for us to survive is to enhance our technological capabilities and stick to production of high-end products," Pan said.

These high-end petrochemical products should include composite materials made from petroleum, Pan said.

China's petrochemical production is increasing with more capacity planned and major projects either under construction or awaiting government approval.

Sinopec was given the green light recently from the National Development and Reform Commission (NDRC) to build a 800,000-ton-per-year ethylene steam cracker in Wuhan, capital of Hubei Province.

Earlier this year, the NDRC approved the expansion plan of Sinopec's refinery and petrochemical project in Fujian Province.

PetroChina, the country's top oil company, is set to build a gigantic refinery and an ethylene plant in Sichuan Province. The ethylene plant will produce 800,000 tons of petrochemicals annually.

(China Daily 04/07/2007 page10)

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