Shandong Refining Industry Transforms from Scale Advantage to Quality Advantage
Shandong Refining Industry Transforms from Scale Advantage to Quality Advantage
Innovation Breakthrough Refining and Chemical Integration Alkali Oil Increase Alkali Oil Increase Special
After the Spring Festival, Shandong Dongming Petrochemical Group swiftly resumed operations on its 300,000-ton/year crude oil catalytic cracking to olefins (UPC) pilot project, with plans to complete and commission it within the year. This high-profile project, which has garnered significant attention since its inception, is pushing the industrialization threshold of a crude oil-to-olefins technology once deemed ‘impossible’ by the industry.
Against the backdrop of energy transition, the “dual carbon” goals, and high-quality development requirements, Shandong’s local refineries, represented by Dongming Petrochemical, are leveraging major projects to transform into integrated refining and chemical plants, high-end products, and green, low-carbon operations. This shift is accelerating the industry’s transition from scale-based advantages to quality-driven competitiveness.
In recent years, the combined pressures from both domestic and international markets have pushed Shandong’s local refineries to a critical juncture where they must transform or face elimination.
“The breakthrough hinges on disruptive innovation in core technologies,” stated Ding Shubing, President of Shandong High-end Chemical Research Institute and Vice President of Dongming Petrochemical Group. The Dongming Petrochemical UPC project, with a total investment of 11.07 billion yuan, is the world’s first industrial-scale demonstration of UPC technology. It pioneers a new approach to crude oil-to-olefins production characterized by “short process, high efficiency, low emissions, and high yield,” offering an innovative solution for industry process upgrades. Upon commissioning, the project will establish a full-chain, high-value industrial system that “transforms a drop of oil into high-end materials.”
Industry experts observe that Shandong’s major refineries are now prioritizing high-value-added products and differentiated strategies. By adopting the “oil-to-chemicals” and “oil-to-specialty” development models, they are boosting production of premium products while enabling flexible conversion of light chemical feedstocks. This approach allows real-time optimization of raw material allocation and product mix in response to market demands, achieving dual goals of economic growth and green, low-carbon energy efficiency. The primary transformation strategy focuses on “reducing oil, increasing chemicals” —specifically, lowering refined oil ratios while raising chemical product yields above 30%. This involves developing foundational chemical raw materials like ethylene and propylene, which then serve as building blocks for downstream high-value-added products.
Along this development trajectory, multiple local refineries in Shandong Province have embarked on differentiated transformation strategies. In Heze, Dongming Petrochemical has launched a 73.8-billion-yuan integrated refining and petrochemical project, featuring 15 million tons/year oil refining capacity, 1.6 million tons/year ethylene production, 2.2 million tons/year aromatics (xylene) output, and downstream facilities. Through coordinated operation of 36 process units, the project aims to increase chemical product proportion from 45% to over 60%. At Dongying Port, the 31.8-billion-yuan Fuhai (Dongying) Petrochemical demonstration project for low-carbon aromatics restructuring and comprehensive utilization plans 22 process units including 15 million tons/year atmospheric units and 2.2 million tons/year continuous reforming units, capable of co-producing over 10 high-value-added chemical products. In Zibo, Xintai Petrochemical’s 18.7-billion-yuan aliphatic material utilization project and green low-carbon olefin integration initiative will establish 19 chemical new materials and specialty chemical production units, forming a complete “crude oil-olefins-polyolefins” industrial chain upon full operation. In Yantai, Yulong Petrochemical’s downstream extension project with over 10 billion yuan investment focuses on developing 50+ high-value-added materials including POE elastomers and nylon 66, creating a closed-loop “crude oil-olefins-aromatics-high-end materials” industrial chain that boosts chemical product value by over 80%.
The 2025 Government Work Report of Shandong Province proposed to ‘strive for the approval and implementation of projects such as the Dongming Petrochemical Refining and Chemical Integration Project and the Dongying Port PX Upstream and Downstream Supporting Projects.’ Currently, these projects are implementing various resource elements according to the plan and completing the approval procedures.
For medium-sized refineries lacking substantial investment capacity, many have shifted from crude oil production to specialty oil products, high-end solvents, and lubricant base oils. For instance, Jingbo Petrochemical specializes in premium specialty oils and lubricants, Shandong Haikai focuses on high-end solvents and chemical fiber raw materials, while Qicheng Petrochemical concentrates on C4 comprehensive utilization to produce clean fuel additives.
Among the companies exiting local refining capacity, some have pivoted to new production lines, while others have shifted focus to emerging sectors. Hengyuan Petrochemical, for instance, has decommissioned traditional refining units and repurposed its existing carbon resources to produce high-value-added materials like needle coke. These products are used in lithium battery anodes and ultra-high-power electrodes, marking a remarkable transformation from crude oil refining to advanced material production.
