CNOOC and Shell Petrochemicals Co Ltd, China's biggest Sino-foreign partnership deal, plans to expand its current capacity by 10 to 20 percent within the next four years, to meet surging domestic demand.

 

The US$4.3 billion joint project, launched in March between Royal Dutch Shell and China's biggest offshore oil company China National Offshore Oil Corp (CNOOC), yesterday disclosed plans to further expand its capacity.

 

"We are now looking at a 10 percent to 20 percent expansion of our existing production facilities within the next four years," Jean-Louis Bilhou, the joint venture's manufacturing director, told reporters yesterday at Daya Bay of South China's Guangdong Province.

 

The plant is currently able to annually produce 80,000 tons of ethylene and 2.3 million tons of other petrochemicals widely used in plastics production.

 

"We could easily expand the current capacity by 10 percent, without incurring much expenditure," Bilhou said.

 

For long-term development, the petrochemical complex also has intentions of constructing additional green-field facilities in the second-phase expansion, which might be more than 20 percent, the director said.

 

Simon Lam Chun Kai, chief executive officer of the joint plant, said the company had already reserved empty land for the new facilities, but decisions on its timescale and investment has yet to be finalized.

 

"It normally takes six months for us to do a feasibility study on expansion," Lam said, without providing further details.

 

More than half the plant's output is marketed around the Pearl River Delta region in South China, said Zhai Hongxing, deputy chief executive officer of CNOOC-Shell Petrochemicals.

 

Even at full capacity, the plant can only supply less than 10 percent of local market consumption in China, Lam said.

 

"We foresee very good market prospects in the Chinese petrochemical industry, and we want to increase production of some products with good economic returns," Zhai said.

 

Seeing the enormous market potential in China, Shell is diverting investment to Asia from Western nations, Liu Xiaowei, a senior Shell official, said. Shell may almost double investment in China's petrochemical market by 2010, according to Liu.

 

At a media briefing yesterday, Liu dismissed previous reports that the Anglo-Dutch oil giant had interest in taking a stake in a new 12-million-ton-per-year refinery that CNOOC plans to build beside the joint petrochemical complex.

 

Construction has already started on the 19.3-billion-yuan (US$2.4-billion) CNOOC refinery, which is expected to come on stream by 2008.

 

Lam yesterday refused to disclose how long it would take to see the multi-billion investment returned on the joint petrochemical plant but said its cutting-edge technology, management and global marketing would give it a competitive edge among rivals.

 

CNOOC-Shell Petrochemicals is a 50-50 joint investment between Shell and CNOOC, China's third biggest oil company.

 

(China Daily July 21, 2006)