Chinese company Shandong Yulong Petrochemical is increasing imports of Russian oil to compensate for supply disruptions after the UK imposed sanctions on the plant over its purchase of Russian oil, Reuters reports, citing five sources familiar with the situation, UNN writes.
Details
This newest refinery in China, with a daily processing capacity of 400,000 barrels per day, is operating at over 90% of its capacity, two sources said.
Yulong, located in the eastern refining hub of Shandong province in China, plans to buy 15 cargoes of Russian oil in November, all sources said.
Most of the imports are ESPO crude, but two sources said the imports also include Urals and Sokol crude.
The volume, equivalent to 370,000-405,000 barrels per day, would be a record for Russian oil purchased by Yulong in a month, compared to an average consumption of about 200,000 barrels per day, two sources said.
They added that the shift to expanding Russian oil supplies is likely to continue in the coming months.
Yulong's decision to increase purchases from Russia came days after the UK added it to its sanctions list along with other companies on October 16.
This sanctions list, followed by EU sanctions last week, prompted several sellers to cancel deals to supply Yulong with oil from the Middle East and Canada, leading to a supply shortage for the refinery, three sources said.
Sanctions imposed by the US and EU last week on Russian oil trade have forced Chinese state oil importers and Indian refineries to suspend Russian oil trade at least for the time being, Reuters reports.
This has led to supplies of ESPO blend, Russia's flagship export grade from the Far East, and Urals crude, exported from European ports of Russia and previously mainly destined for India, seeking new buyers.
Two trading sources said Yulong took over several shipments destined for Unipec, as the trading arm of state giant Sinopec suspended deals for Russian oil supplies due to concerns about the potential impact of secondary sanctions.
Addition
The construction of Yulong Petrochemical, partly owned by Shandong Energy Group and supported by the provincial government, cost more than $20 billion. It is considered a landmark investment in Shandong's industry among small refineries known as "teapots."
It is integrated with a 3 million tons per year ethylene complex, one of the largest in China.