Shandong Dongming Petrochemicals Group has become China's largest teapot refinery, with a capacity of 240,000 barrels per day (bpd) after a new 120,000 bpd crude unit came onstream this month, an industry source said on Tuesday.

Dongming, which now receives crude oil via rail and road, will receive crude via a pipeline run by state oil major PetroChina from Oct. 30, the source said.

Dongming, in the eastern province of Shandong, produces mainly gasoline, diesel and chemical products. The pipeline, from Rizhao, 446 km away, has a transmission capacity of 200,000 bpd, the source added.

To match the new crude refining capacity, a 3.0 million tonne-per-year fluid catalytic cracking (FCC) unit will be built by the end of 2013, said the source who declined to be identified because he is not authorised to speak to the media.

Teapot refineries, which are small plants independent of big state-owned refiners such as PetroChina and Sinopec , are often a key swing factor for China's refinery runs.

China's crude runs hit a record daily high of 9.43 million bpd in September, largely because teapot refineries boosted crude throughput on improved refining margins after the government raised fuel prices twice.

Run rates at teapot refineries rose to more than 40 percent in September, from around 30 percent in August and 20 percent in July, analysts have said.

The refining capacity of China's teapot refineries is around 2.0 million bpd, or about a fifth of total refining capacity.