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China's Hengyi to start up $3.4 bln Brunei oil refinery in 2019 -sources
June 2, 2017 / 8:11 AM / 6 months ago

China's Hengyi to start up $3.4 bln Brunei oil refinery in 2019 -sources

* Expects to complete construction next year -sources

* Will be years behind original target date

* To provide feedstock for Chinese operations

* Will also churn out fuel, competing with regional suppliers

By Chen Aizhu and Jessica Jaganathan

BEIJING/SINGAPORE, June 2 (Reuters) - Privately-run Chinese company Hengyi Group expects to start operating a $3.4 billion refinery in resource-rich Brunei in 2019 after completing building work in October next year, two industry executives briefed on the matter told Reuters.

Hengyi had previously delayed the start up of the 160,000 barrels-per-day facility in Southeast Asia from an initial 2015 target, partly blaming delays in local infrastructure.

East China-based Hengyi, a leading manufacturer of synthetic fibre, declined to comment this week, while the Brunei government did not respond to an email seeking comment.

The company in March signed off on the final investment for the $3.445 billion refinery at Pulau Muara Besar island in Brunei, the largest of its kind run outside China by a private Chinese firm.

The facility will primarily provide feedstock for Hengyi’s massive Chinese production of pure terephthalic acid, or PTA, an intermediate for making polyester. But it will also churn out fuel, competing with supply from the region’s oil hub, Singapore.

That comes as new refineries are also due to come online in Vietnam and Malaysia.

“There’s already an oversupply so any delay is good. Nghi Son (in Vietnam) is coming up in 2018 and the Refinery and Petrochemical Integrated Development (RAPID) project (by Malaysia’s Petronas) is in 2019,” said Nevyn Nah of Energy Aspects.

Hengyi agreed in 2012 with Royal Dutch Shell, long active in exploring for oil and gas in the kingdom, to supply the refinery with crude oil over a 15-year term.

It was unclear if that deal remained valid. Shell said it would not comment on commercial matters.

One of the two industry sources said Hengyi may explore a swap deal with Shell, with the major supplying some crude in return for refined products.

China’s Lanzhou LS Heavy Equipment Co Ltd has been contracted to build key production units at the refinery including a 1.5 million tonne per year aromatics facility and a 2.2 million tpy hydrocracking unit.

Kunlun Construction and Engineering Corp, a unit of state energy group China National Petroleum Corp, has previously said it won a deal in late 2016 to build a 15-million-barrel tank farm at the development.

Started as a small sock-weaving factory in 1994, Hengyi recorded 79.4 billion yuan ($11.68 billion) sales revenue in 2015. ($1 = 6.8005 Chinese yuan renminbi) (Reporting by Chen Aizhu in Beijing and Jessica Jaganathan in Singapore; Additional reporting by Mark Tay and Seng Li Peng in Singapore; Editing by Joseph Radford)

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