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Petrochemical Plant Keeps Running despite Shutdown Order

Dalian Fujia Petrochemical is operating its 700,000-ton-per-year paraxylene plant normally despite a local government order to close the plant due to a toxic spill scare.

BEIJING | (Reuters) - A Chinese petrochemical plant was operating normally on Monday despite a local government order to close it down due to a toxic spill scare, an industry source said.

Authorities in Dalian in northeastern Liaoning province ordered Dalian Fujia Petrochemical to shut down on Sunday after thousands of local residents demonstrated, demanding the relocation of the factory at the center of a toxic spill scare.

But the company, one of the country's leading importers of naphtha, was carrying on normal shipments from regular suppliers such as Iran and Papua New Guinea, said the source.

Environmental worries in China have stoked calls for expanded rights for citizens in the one-party state, but the Sunday protest has extended it to calls for more government accountability, highlighting the mistrust that Dalian residents have in its leaders.

"The plant is running normally ... there is no notice for operation changes," said the source with direct knowledge of the plant's operations.

The Fujia plant, jointly owned by local government-backed Dalian Chemical Group and private real estate company Fujia Group, imports 100,000-120,000 tonnes of heavy naphtha a month, making it the country's largest independent naphtha importer outside state energy firms like Sinopec and CNOOC.

The industry source said while the plant was running normal for now, it remained unclear what would happen later.

Calls to the Dalian government went unanswered. Officials at Fujia Group, parent of Fujia Petrochemical Co., declined to comment.

According to shipping fixtures and a trading source, there is at least one medium-sized naphtha cargo booked for loading late August from Port Moresby and one or two cargoes from the National Iranian Oil Company.

Big Tax Payer

"I think the Dalian government is under big public pressure to order the shutdown, but at the same time authorities have to consider that Fujia is a big tax payer for Dalian," said a Beijing-based oil trader.

"If it's a complete shutdown, it will have major impact on naphtha and petrochemicals market."

Naphtha, a refinery product, can be used as feedstock to produce PX, which is an intermediate to make polyester. Customs data showed China imported 1.2 million tonnes of naphtha in the first half of the year, with South Korea, Iran and PNG the top three suppliers.

Demonstrators in Dalian faced down a wall of riot police in front of the municipal government office on Sunday, according to witnesses, after a storm burst a sea dyke near the plant, prompting fears toxic chemicals could have been released.

Minor scuffles broke out, although there was no report of injuries among the 12,000 protesters, the official Xinhua news agency said.

Dalian, home to China's aircraft carrier and with about 6 million residents, is the second-biggest city in Liaoning, which recently suffered an oil spill from two offshore platforms that hurt tourism and aquatic farming businesses.

According to Southern Metropolis News, the Fujia plant started full-scale production in June 2009, but it did not get the mandatory environmental approval from the Liaoning environmental protection bureau until April last year.

The plant, one of China's largest PX producers, contributes 2 billion yuan ($311 million) to the local government in the form of taxes every year, Xinhua said.

The chemical PX can cause eye, nose or throat irritation and chronic exposure may result in death.

Reporting by Chen Aizhu; Additional reporting by Sabrina Mao; Luke Pachymuthu and Seng Li Peng in Singapore; Editing by Ken Wills and Nick Macfie