SINGAPORE (Sept 20): China's Shandong Yulong Petrochemical on Friday began starting up one of two new 200,000 barrel per day (bpd) crude units in eastern China, sources said, marking the official launch of the country's newest refinery after four years of construction.

The 400,000-bpd refinery is the only major refinery to come onstream this year in China and also one of the last greenfield plants being built in the country, as Beijing broadly caps crude oil refining capacity amid peaking Chinese fuel demand.

Situated on a man-made island in Longkou county of the city of Yantai, Shandong province, Yulong is expected to keep the crude unit running through at least the end of this year, said one Shandong-based refinery source briefed on the matter.

The launch of the Yulong unit, in line with an earlier Reuters report, came as Chinese refinery crude throughput fell year-on-year for the fifth month in August to levels near two-year lows as demand for diesel declines and gasoline consumption is eroded by massive electric vehicle penetration.

"Yulong started up the refinery at the request of the provincial government, although the company itself was concerned with very weak margins in the current market environment," said the source.

Yulong Petrochemical did not immediately respond to a request for comment.

The US$20 billion project, comprising a 400,000-bpd crude refinery, a 3 million ton-per-year (tpy) ethylene complex and a 3 million tpy paraxylene facility, is a cornerstone project that will help upgrade the fragmented refining sector in Shandong, home to scores of smaller independent refiners, known as teapots.

The project is 51% owned by private aluminium smelter Nanshan Group, 46.1% by provincial government-backed Shandong Energy Group and the remainder by two local firms.

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