China's privately-owned Shandong Tianhong Chemical Co will start operating its 100,000 barrels per day (bpd) refinery in October and plans to double capacity of the petrochemical complex by 2020, several company sources said on Thursday.

The 4.1-billion-yuan ($664-million) complex, in the city of Dongying in eastern Shandong province, will be able to produce diesel and gasoline that meet the national IV standards upon operation, said one company official who declined to be identified, as he was not authorised to speak to the media.

Tianhong, a unit of China's Wanda Group, will use fuel oil as raw material for the plant.

'We are applying to the government for a fuel oil import license,' said one of the sources.

Teapot facilities, generally smaller refineries located in Shandong, mainly process fuel oil into gasoline, diesel and other chemical products because they have limited access to domestic crude.

They also tend to run at lower rates than other plants owned by state-owned PetroChina Co. and China Petroleum & Chemical Corp, because of a lack of access to raw materials.

While the government has tried to crack down on these small independent refiners, Tianhong said the refinery was approved because it is primarily a petrochemical company and needs the refinery to supply its operations with chemical feedstock.

The plant will also include a 2.0-million tonnes per year (tpy) catalytic cracking unita 1.5-million tpy hydrocracking unit, a 1.8-million tpy delayed coking unit and a 1.0-million tpy continuous reformer.

China's teapot refineries import about 10 million tonnes of fuel oil as feedstock each year, the Shandong Fuel Oil Association says.

China Wanda Group, founded in 1988, mainly produces tyre, cables and chemical products. ($1=6.1781 Chinese yuan)