Fujian Province Triples Its Oil Refining Capabilities

UNCLAS SECTION 01 OF 02 GUANGZHOU 000641 SENSITIVE SIPDIS EMB BEIJING FOR DOE USDOE FOR INTERNATIONAL AFFAIRS USDOE FOR FOSSIL POLICY AND ENERGY STATE FOR EAP/CM, S/CIEA AND EEB/ESC STATE ALSO PASS USTR FOR CHINA OFFICE E.O. 12958: N/A TAGS: ENRG ECON EPET SENV PGOV TRGY CH SUBJECT: Fujian Province Triples Its Oil Refining Capabilities GUANGZHOU 00000641 001.2 OF 002 (U) This document is sensitive but unclassified. Please protect accordingly. ¶1. (SBU) Summary: The opening of the Fujian Integrated Refining & Ethylene Joint Venture Project (FREP) Commercial Operation will increase Fujian's annual refining capacity from 4 million to 12 million tons. The project is a joint venture between China's SINOPEC (50%),Exxon-Mobil (25%) and Saudi Arabia's Saudi-Aramco (25%). U.S. and Saudi partners are skeptical about near-term demand growth, but China wants proceed with expansion plans. Chinese officials estimate the facility and associated tie-in manufacturing will create 25,000 jobs in the province. End summary. Higher Production and Job Creation -------------- ¶2. (U) The Fujian Integrated Refining & Ethylene Joint Venture Project (FREP) Commercial Operation formally came online after an opening ceremony on November 11. FREP is a joint venture between SINOPEC, Exxon Mobil, and Saudi Aramco, where SINOPEC has a 50% share and Exxon-Mobil and Saudi-Aramco each have a 25% stake. The project will increase Fujian's annual refining capacity from 4 million to 12 million tons. In addition, a series of large scale chemical facilities, including an ethylene plant, polyethylene and polypropylene units and an aromatics complex have been constructed. There are also plans for additional tie-in/by-product manufacturing facilities to be built in neighboring areas of Quanzhou. A Fujian Foreign Affairs Office official commented that a similar project in Liaoning had created 25,000 jobs, including those associated with the "upstream" and "downstream" companies. ¶3. (U) ExxonMobil CEO Rex Tillerman, Fujian Governor Huang Xiaojing, Sinopec Chairman Su Shulin, Saudi Arabia's Oil Minister Ali Al-Naimi, Saudi Aramco CEO Khalid Al-Falih, the CG, and other dignitaries participated in the ribbon cutting ceremony. (Note: While in Quanzhou, the Consul General also met with Acting Mayor Li Jianguo and other city leaders, spoke with 160 students at Huaqiao University about President Obama's visit, promoted trade and investment, and visited companies involved in the shoe-manufacturing and stone industries.) Green Technology Featured Prominently -------------- ¶4. (U) The complex also features a state-of-the-art 250 megawatt cogeneration3 facility, which will meet the majority of the site's power demands. The facility uses waste-to-energy technology to produce electricity and heat by burning waste gases from the refinery, resulting in lower operating costs and significantly reduced greenhouse gas emissions. Villagers Moved to Make Way -------------- ¶5. (SBU) FREP is located on Meizhou Bay, an attractive location for this type of facility because of its accessibility by sea. The Fujian provincial government reportedly re-located 30,000 people off the land where the plant was built. Security was tight at the opening ceremony, with specific instructions given to guests to stay in designated areas; however, residential apartment housing was clearly visible at distances of about 10 meters from the outer perimeter walls of the plant. Domestic Demand Uncertain -------------- ¶6. (SBU) A high-level executive associated with the project told GUANGZHOU 00000641 002.2 OF 002 the Transformational Diplomacy Officer that the Fujian government still wants to expand the facility, but that the other members of the joint venture were not convinced that domestic market demand would support immediate expansion, and were therefore proceeding with caution. The executive indicated that while Exxon viewed market access as an important step, the firm had some concerns with the central authorities' control over projects profits as well as access to downstream markets. GOLDBECK