Sinopec may take control of PX maker Dragon Aromatics

Sinopec Corp technicians in Puyang, Henan province, make preparations for transporting newly produced liquid carbon dioxide to an oil-drilling field. [Photo/China Daily]

State-owned energy giant to buy 80 percent stake in Fujian-based company

State-owned energy giant Sinopec Corp is in advanced talks on taking a controlling stake in petrochemical firm Dragon Aromatics, which operates one of the country's biggest chemical plants, three sources with knowledge of the matter said.

The discussions come after the independent petrochemical firm suffered a second major fire in less than two years at the $3 billion plant in Fujian, and sources said local authorities want Sinopec to participate before allowing the plant to reopen.

The tough line shows how Beijing is putting pressure on provinces to ensure better industrial safety standards and protect the environment after a series of accidents have stirred protests from residents opposed to plants in their backyard.

Dragon Aromatics, owned by Taiwan's Xianglu Group, was forced to shut the plant with a capacity to produce 1.6 million metric tons a year of paraxylene, a chemical used to make polyester fiber and plastics, after the fire in April.

"This is what the local government has insisted: Without Sinopec's participation the plant won't be allowed to resume operations," said one of the sources, who declined to be named due to the sensitivity of the discussions.

Sinopec could take up to 80 percent of the stake, the source said. Sinopec spokesman Lu Dapeng declined to comment.

A senior Dragon Aromatics official said that he was not in a position to comment on the communications at the board level but told Reuters the firm was "trying every means to resume the plant's production as soon as possible."

The PX plant is located on a peninsular called Gulei, part of Zhangzhou city and a site where State-owned firms including Sinopec and China National Offshore Oil Corp had previously tried to build petrochemical plants.

Calls to the press department of the Zhangzhou municipal government were not answered, while an official on the management committee of the Gulei economic zone did not respond to a fax seeking comment.

Industrial safety has come under heightened scrutiny in China since a devastating explosion in August at a chemical warehouse in Tianjin port that killed 160 people.