China's Yanchang seen doubling Russian oil purchases - sources

By Chen Aizhu

SINGAPORE (Reuters) - China's state-controlled Shaanxi Yanchang Petroleum Group is expected to double its purchases of Russian ESPO blend this year to about one million metric tons, according to two sources familiar with the plant's operations.

The company is due to start up a 50,000 barrels per day crude processing unit at its refinery in landlocked Shaanxi province in the north later this month, after retooling work that allows the plant to process more crude, the sources said.

Chinese refiners, led by independent plants based in eastern Shandong province's refining hub, are maintaining strong interest in the light sweet crude exported from Russia's Far East port of Kozmino, bolstering the Russian oil's prices to multi-month highs.

An official with Yanchang's refining division said the plant will likely process more imported crude oil this year, but did not comment specifically on Russian crude.

The Yanchang plant has bought three ESPO cargoes for August and September deliveries into Qingdao port, according to trading sources who closely follow ESPO transactions.

That will bring Yanchang's total purchases so far this year to 600,000-700,000 tonnes, about 4.4 million to 5.1 million barrels, one of the sources added.

Apart from the revamped crude processing unit, Yanchang also has remaining crude quotas to use up by the end of the year, a second trader said.

From Qingdao port, Yanchang transports the crude oil by rail, taking about a day to reach Shaanxi's Yulin city, where the plant is based.

Backed by the Shaanxi provincial government, Yanchang Petroleum is a rare regional oil and gas producer outside the national energy majors. It also invests in large coal-to-chemicals businesses.

The refining subsidiary processed nearly 14 million tons of crude last year, or 280,000 barrels per day, local state media has reported.

(Reporting by Chen Aizhu; additional reporting by Beijing newsroom; Editing by Sharon Singleton)