By Fu Jing (China Daily)
Updated: 2007-12-05 09:17

The central government has finally approved a multi-billion dollar oil refinery and chemical project in China's economic hub Guangdong Province following months of feasibility studies.

The project will be built by Chinese and Kuwaiti oil companies, and is the biggest joint investment on the mainland since China commenced its opening-up policy in 1978, according to previous media reports.

An official from the National Development and Reform Commission said China's planning body has given its approval for Sinopec, the country's second-biggest oil producer, and Kuwait Petroleum Corp to start "initial work" on the refinery and chemical project in Nansha, of the province.

Previous reports said total investment would be $5 billion, the largest joint venture in China, surpassing the $4.3 billion petrochemical complex in Huizhou, Guangdong, co-invested by Shell and CNOOC, China's third-biggest oil company.

The official told China Daily that the proposed ethylene plant has an annual production capacity of 1 million metric tons, but would not reveal the capacity of the refinery.

An official surnamed Xie from the Guangdong provincial development and reform commission confirmed the central government's approval, saying "the initial work will be started soon".

It is expected the facilities will begin operation in 2010.

"I think the project will help ensure fuel supply of the economically fast-paced province," Xie said.

Sinopec said in August that the Nansha plant will be able to process 12 million metric tons of crude oil a year and the ethylene unit will have an annual capacity of between 800,000 tons and 1 million tons.

Since last July, expert teams have been conducting feasibility studies on the environmental impact and how it could be protected after China and Kuwait signed a memorandum of understanding on the refinery in December 2005.

Guangdong Province, the manufacturing and chemical powerhouse of China, has contributed nearly 10 percent of the country's economic growth but has been experiencing tight supplies of fuel for years.

Statistics show the province used more than 10 million tons of oil from January to June, up 11.2 percent year-on-year. Guangdong purchased more than 50.7 million tons of coal from around the world in the first five months this year, up 9.9 percent from the same period last year.

To ensure energy security in the region, the central government has planned new nuclear plants and oil reserve bases in the province.

Meanwhile, massive projects to transport natural gases and electricity from energy-rich western regions have been planned and partially put into operation.

"When all the projects have been fully put into use and our energy-saving efforts have been paid off, we can breathe a sigh of relief," Xie said.