Chinese oil trader Sinochem is building its first wholly-owned major refinery in south China, and is eyeing strategic partnerships with Kuwait's state oil firm and French major Total, industry officials told Reuters.

Sinochem aims to complete the 240,000 barrels per day plant in Quanzhou, Fujian Province, in 2012. It is set to be China's next major greenfield refinery as the world's No. 2 oil consumer adds refining capacity to fuel strong economic growth.

"The project is going smoothly," one official familiar with the plant's construction said yesterday.

The refinery, estimated to cost close to US$4 billion by a second industry executive, is awaiting the government's final approval after securing a preliminary go-ahead from the top energy agency, the National Energy Administration.

Sinochem hopes to partner OPEC member Kuwait, which in late 2007 agreed to supply 240,000 bpd of crude to the Sinochem plant now designed to treat Kuwaiti oil.

Sinochem also wants its long-time partner, Total, in the project, sources said.

Sinochem expects to hold a 51 percent stake in the project, while the other two parties would evenly split the remaining 49 percent.

A Total spokesperson declined to comment on her firm's participation.

Worried that the project may not get approval from the central government, Sinochem said in 2007 it wanted a 100,000-bpd plant to process fuel oil, which only needs clearance from local government.

"That hurdle - the worry that the bigger buys will block it - is gone now," said a Sinochem executive who declined to be named.

Sinochem, until 1993 China's monopoly oil trader, wants to establish itself into a solid No. 4 oil firm in the country, after PetroChina, Sinopec Corp and CNOOC Ltd, by building up its exploration, refining and fuel marketing strength.

Its only other refinery holding is a 200,000 bpd plant in northeast China, a joint venture with Total and PetroChina. But the plant is virtually controlled by PetroChina.

Sinochem runs a separate fuel marketing firm, also in tie-ups with Total, to set up petrol stations in China.

An alliance with Kuwait, if finalized, would mean the Middle East exporter likely committing crude supplies totaling 540,000 bpd to China.

(Shanghai Daily August 14, 2009)