Graham's Chen: Chinese Downstream Should Remain Robust

Graham's Chen: Chinese Downstream Should Remain Robust
Growth in China's downstream sector may have ebbed over the past year, but the long-term prospects for refined products in the world's most populous country remain strong.

Growth in China's downstream sector may have ebbed over the past year, but the long-term prospects for refined products in the world's most populous country remain strong. Graham Corp., U.S.-based international equipment supplier and service provider to refineries and petrochemical plants, continues to see abundant opportunity in this burgeoning market.

"The refining industry has expanded from the total refining capacity 250 million tonnes (5 million b/d) in 2006 to 430 million tonnes (8.6 million b/d) in the end of 2008," said Leon Chen, Graham's General Manager in China. He pointed out that several major refining facilities have been built in the past three years, including PetroChina's 10-million-tonne (200,000 b/d) Dushanzi project and CNOOC's 12-million-tonne (240,000 b/d) Huizhou project. "Graham provided vacuum systems to those refining facilities," Chen noted. "In addition, we are providing equipment for the Sinopec Tianjin, PetroChina Guangxi and PetroChina Qilu refining projects."

Graham Corp. designs and manufactures vacuum and heat transfer products for the oil refining, petrochemical, chemical, fertilizer, and power generation industries. Chen, who joined Graham three years ago, leads the Batavia, N.Y.-based company's Chinese operations from the city of Suzhou, Jiangsu province. His 20-year career has also included sales management and business development positions on three continents in the metals and minerals import/export , marine mechanical engineering, and fiber optics in telecommunication industries. Chen holds an engineering degree in optic-electronics from Tianjin University and an international business degree from University of International Business and Economics (Beijing).

'Huge' growth potential

Describing the scope of China's refining and petrochemicals opportunities as "huge," Chen expects the country's downstream market to remain robust because the government strongly supports its development. "The government is working hard on enhancing the refining capacity and upgrading its facilities into the larger, integrated, world-class complexes," he explained, adding that several new refining projects recently won priority funding in an effort to stimulate the country's economy. At least five or six new refining projects, each with a capacity greater than 10 million tonnes (200,000 b/d), are being built through 2012.

Chen noted the opportunities for equipment suppliers and service providers are particularly strong in the southeast coastal provinces of Guangdong and Fujian, where expansion, upgrade, and grassroots projects are concentrated. Aside from the growth in Guangdong and Fujian, there are major projects underway farther north in the Yangtze River Delta area. The map below indicates projects in these three regions that have been completed or are under development.

Chinese Downstream Refineries Map

Gaining A Foothold

Given the outlook for China's refining industry, Graham and other international companies serving the downstream sector have taken steps to improve their respective market positions in the country. Graham, for instance, formed a wholly owned foreign enterprise Graham Vacuum and Heat Transfer Technology (Suzhou) Co., Ltd. in 2006 after identifying China's refining sector as a growth market. To date the company has been involved in several large-capacity (primarily above 10 million t/y) projects by providing engineering solutions and equipment for vacuum distillation services. Also, it has evaluated and provided assistance to clients wishing to improve the operation of existing refinery equipment.

Chen expects China to emerge as a genuine refining powerhouse over the next two decades, with a total refining capacity approaching that of the United States. "There is a tremendous demand for oil products and the huge growing opportunities for the refining and petrochemical industries in this 1.5 billion-population country," he concluded.

Matthew V. Veazey has written about the oil and gas industry since 2000. Email Matthew at mveazey@rigzone.com

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