Chinese refinery turns to record Russian oil imports following UK, EU sanctions

China’s Shandong Yulong Petrochemical is significantly increasing imports of Russian crude to offset supply disruptions after the United Kingdom imposed sanctions on the refiner over its purchases of Russian oil, five trading sources familiar with the matter told Reuters.

Yulong — China’s newest refinery, with a daily processing capacity of 400,000 barrels — is maintaining operations at over 90% capacity, according to two of the sources. All requested anonymity as the information was not public.

Located in the eastern refining hub of Shandong, Yulong is expected to import 15 shipments of Russian crude in November, the sources said. Most of the cargoes consist of the ESPO blend, with additional volumes of Urals and Sokol crude, according to two of them.

The total volume, estimated at 370,000 to 405,000 barrels per day, would mark a record monthly intake of Russian oil for Yulong — nearly double its average imports of around 200,000 bpd. The refinery’s increased reliance on Russian crude is expected to continue in the coming months, the sources added.

Yulong’s move to ramp up Russian oil purchases came shortly after Britain sanctioned the company, along with several others, on October 16. The designation — followed by European Union sanctions last week — prompted several suppliers to cancel deliveries of Middle Eastern and Canadian crude, creating a supply shortfall for Yulong, three of the sources said.

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

Recent US and EU sanctions targeting Russia’s oil trade have prompted major Chinese state-run importers and Indian refiners to pause Russian oil purchases, at least temporarily, Reuters reported earlier.

As a result, shipments of ESPO blend, Russia’s main Far Eastern export grade, and Urals, exported from its European ports and traditionally destined for India, have been left searching for new buyers.

Two of the trading sources said Yulong has taken over several shipments that had been originally allocated to Unipec, the trading arm of state energy giant Sinopec, which halted Russian oil dealings amid fears of potential secondary sanctions. A Sinopec spokesperson declined immediate comment.

Yulong Petrochemical, partly owned by Shandong Energy Group — a company backed by the provincial government — cost over $20 billion to construct and is considered a flagship industrial project in Shandong’s refining sector, traditionally dominated by smaller “teapot” refineries.

The complex also houses a 3-million-ton-per-year ethylene plant, one of China’s largest, integrating petrochemical production with refining to enhance efficiency and competitiveness.

By Vafa Guliyeva