In a calculated response to urban safety pressures and China's strategic petrochemical transformation, PetroChina has greenlit a massive 68.5 billion yuan ($9.6 billion) refinery and petrochemical complex on Changxing Island. This long-anticipated move represents both a mandated relocation from its aging Dalian downtown facility and a strategic repositioning toward integrated petrochemical production

The relocation addresses safety concerns and urban encroachment issues that have intensified since 2009, when Dalian municipal authorities first pushed for the facility's removal from its location less than 10 kilometers from downtown. Following multiple incidents—including fires in 2011 and 2017, and an explosion in 2013—Liaoning Province's vice governor publicly appealed to central authorities in 2020 for the refinery's closure, citing public safety risks from its proximity to densely populated areas.

Integrated Petrochemical Strategy

The new Changxing Island complex, located roughly two hours from central Dalian, features a streamlined 200,000 barrels-per-day crude refinery—half the capacity of the now-shuttered 410,000 bpd predecessor—paired with a 1.4 million metric tons-per-year ethylene plant (steam cracker) and downstream units for polyethylene, polypropylene, and polyolefin elastomers. This configuration reflects China's broader "oil-to-chemicals" transformation strategy, where integrated refining-petrochemical facilities achieve over 40% chemical feedstock yields from crude oil—nearly triple the 15% typical of traditional refineries.​

By prioritizing high-value chemicals over traditional fuels, PetroChina positions itself to capture margins 200-400 yuan per ton higher than conventional refining operations while addressing China's structural dependence on imported ethylene and paraxylene. The facility aligns with national policy designating Changxing Island as one of seven strategic petrochemical bases, targeting world-class integrated production capabilities.

Project Status and Legacy Facility Closure

Construction commenced following final investment decision, with initial work on jetties and pipelines underway. The old Dalian Petrochemical plant, PetroChina's largest domestic refinery, wrapped up operations in June 2025, marking the first major state-run refinery shutdown in China. This closure, fulfilling requirements under China's 2017 State Council mandate for relocating chemical facilities from urban areas, frees up crude allocations for nearby sites like WEPEC and Jinzhou, boosting their utilization rates.​

The March 2024 agreement between Dalian city and CNPC outlined the relocation framework, with the new facility following a "differentiation, high-end and characteristic" development strategy designed to maximize chemical production rather than traditional fuel output.

Investment Implications

For investors eyeing Asia's energy sector, this project signals strategic adaptation rather than retreat. The Changxing Island hub—part of a designated green petrochemical base targeting 40 million tons annual refining capacity and 10 million tons ethylene capacity by 2030—positions PetroChina to capture growing petrochemical demand while meeting increasingly stringent urban safety and environmental requirements.​

The facility's integrated design potentially enhances margins through coordinated production of refined products and chemical feedstocks, cushioning against volatile oil prices while participating in chemical markets with more favorable long-term demand trajectories than traditional transportation fuels. With commercial startup anticipated in the late 2020s or early 2030s, the project represents long-term positioning in China's evolving energy-chemical landscape.​

This development, while not yet officially announced by PetroChina, has been confirmed across multiple industry channels, highlighting a broader transformation in China's refining sector: state-owned enterprises executing mandated relocations from urban centers to designated industrial zones while simultaneously upgrading operations toward higher-value petrochemical integration.​

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