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Cablegate: Fujian Province Triples Its Oil Refining Capabilities

VZCZCXRO3445
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0641/01 3240516
ZNR UUUUU ZZH
R 200516Z NOV 09
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 1107
INFO RUEHOO/CHINA POSTS COLLECTIVE 0344
RUEHBJ/AMEMBASSY BEIJING 0883
RUEHRH/AMEMBASSY RIYADH 0001
RUEHGH/AMCONSUL SHANGHAI 0275
RUEHCN/AMCONSUL CHENGDU 0276
RUEHSH/AMCONSUL SHENYANG 0285
RUEHHK/AMCONSUL HONG KONG 0345
RUEHIN/AIT TAIPEI 0252
RUEHDH/AMCONSUL DHAHRAN 0001
RUEHJI/AMCONSUL JEDDAH 0001
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFISS/DEPT OF ENERGY WASHINGTON DC 0038
RUEATRS/DEPT OF TREASURY WASH DC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC 0015
RUEAIIA/CIA WASHDC 0324
RUEKJCS/DIA WASHDC 0320
RHHMUNA/HQ USPACOM HONOLULU HI
RUEKJCS/SECDEF WASHDC 0010

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

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