The catalytic pyrolysis process (CPP) technique is expected to spread faster in China after the Chinese government released a policy on consumption tax of fuel oil used to produce ethylene and aromatics, a survey found.

Construction of CPP facilities may boom in China in the next 2-3 years, which would boost demand for straight-run fuel oil dramatically, believed some fuel oil importers familiar with oil refining industry.

Currently, only Shenyang Chemical Industry Group could benefit from the new policy, which is equipped with a 500,000-mt/yr CPP facility with ethylene and aromatics output ratio reaching 53%. The plant, with stake controlled by ChemChina, plans to build another such facility with annual capacity of 3-mil mt in the future.

Catalytic pyrolysis is a process of cracking heavy oil to light olefins, which includes straight-run fuel oil, wax oil, wax oil-residue blend, coked wax oil and deasphalted oil.

The Ministry of Finance and the State Administration of Taxation jointly announced on Aug 20 to give rebates of consumption tax imposed on fuel oil imported as feedstock to produce ethylene and aromatics retroactively from Jan 1, 2010, with validity till Dec 31, 2010.

Fuel oil produced by domestic refineries and used to produce ethylene and aromatics could be exempt from consumption tax, the notification said.

Enterprises qualified to enjoy the rebates or tax exemption should have their yield of ethylene and aromatics accounting for at least 50% of the total output of their fuel oil-refined products, it prescribed.

Independent refineries, major fuel oil consumer in China, may not benefit a lot from the policy, because most of them have no ethylene crackers and aromatics extraction units.

"The policy encourages production of ethylene and aromatics with fuel oil as feedstock; at the same time, it requires producers to produce ethylene and aromatics on a certain scale, which should occupy 50% or more of product yield," said a market source.