Sinopec puts hold on $3.1b Qingdao ethylene project

Sinopec Corp, China's largest oil producer by sales revenue, has held up a $3.1 billion ethylene plant in Qingdao, East China's Shandong Province, after a fatal pipeline blast in 2013 threw into question whether the city is environmentally viable for the petrochemical complex, a company source said on Monday.

The November 2013 explosion in the bustling coastal city killed 62 and exposed the danger of sprawling urban development that often conflicts with industrial planning by engulfing oil and gas infrastructure.

"It (the project) has been put on hold for now," said the Sinopec source.

"Sinopec is waiting for the government's final word on it."

The delay also comes amid concern about demand growth in China's petrochemical sector and new competition from US shale gas crackers.

Sinopec spokesman Lu Dapeng, when asked about the status of the Qingdao project, said there has been no official verdict yet on that matter.

But Lu noted that there is no timeline for when construction will start on the plant, which received environmental clearance in June 2013.

The city's Huangdao district already has a 200,000-barrel-per-day Sinopec refinery and a 700,000-ton-per-year paraxylene plant built by Korean and Omani companies.

Huangdao is also the site of one of China's first strategic petroleum reserves. Sinopec's Qingdao ethylene plant was to be its first designed to use natural gas and liquefied petroleum gas as a feedstock.

The company posted a 15.3 percent fall in first-quarter profit in 2014, as a sharp improvement at its refining business was offset by declines at its upstream and chemicals businesses.

The company posted a net profit of 14.1 billion yuan ($2.25 billion) versus 16.7 billion yuan a year earlier, it said in a filing with the Shanghai bourse.

Sinopec said in March that it would cut capital expenditure to 162 billion yuan this year from 169 billion yuan in 2013.