Asia's largest refiner China Petroleum and Chemical Corp (Sinopec) and its partner, the Germany-based BASF, plan to expand ethylene production at their Nanjing joint-venture by 25 percent to meet surging demand.

"It is definite that we will expand the site's production capacity, and further partnership with BASF," said Wang Tianpu, president of Sinopec, before the formal opening ceremony of their joint venture in Nanjing, the capital city of East China's Jiangsu Province. The plant actually started operating in June and already plans to increase capacity.

Details of the plant's expansion and further co-operation with BASF are still under discussion, the Sinopec senior official yesterday said.

Currently, China relies on imports for half of its demand for chemicals.

"For such a big country like China with huge energy demands, it is not necessary and not feasible to depend so heavily on imports for chemical consumption," said Wang. "Even the start-up of big ventures such as the one at Nanjing is not enough to meet the needs of the growing market."

Sinopec and BASF yesterday announced the commercial operation of their 50-50 joint-venture in Nanjing. It is able to produce 1.7 million tons of chemical products each year from its 10 petrochemicals complex, including ethylene.

The new site, with a total investment of US$2.9 billion, also has a gas-fired power plant fuelled by PetroChina's West-East Gas Pipeline, as well as an international port on a tributary of the Yangtze River.

The venture is expected to break even or make a slight profit this year, BASF Chairman Juergen Hambrecht said on Tuesday.

To tap the huge market potential in China's chemical industry, several foreign and domestic petroleum giants are increasing investment.

China's petrochemical production last year was equivalent to 6.7 million tons of ethylene, while domestic demand for petrochemicals reached almost 16 million tons, Wang said.

"So there are great business opportunities in China's petrochemical market," Wang said.

In the domestic market there are both foreign and domestic companies such as Shell, BP and China National Offshore Oil Corp, who are all planning and expanding chemical production across China. It means "increasing challenges for Sinopec," Wang said.

He added that the expansion of petrochemical producers in the Middle East, who sit on cheap crude oil sources, are also aimed at the fast-expanding Chinese market.

"The market in China does not naturally belong to Sinopec," Wang said. "We need to take more initiative and speed up expansion work."

(China Daily September 29, 2005)