A joint venture between Sinopec - China's largest petrochemical company - and British oil giant BP secured two-thirds of the total investment for a US$2.7 billion petrochemical project from nine domestic and two international banks.

Bankers said the financing, one of the largest since China opened its economy in 1979, symbolizes domestic banks' initial willingness to extend a large US dollar-denominated loan to a joint-venture company.

The Shanghai-based joint venture, Shanghai SECCO Petrochemical Company, aims to build a world-class complex to produce 900,000 tons of ethylene yearly, which could be the largest of its kind in Asia when it comes on stream in 2005.

Also at Friday's signing ceremony, the world's leading construction companies, AMEC and ABB Lummuis, were announced as two key contractors for the project.

According to Sinopec's statement, the rest of the investment - US$900 million - comes from equity contributions from BP, Sinopec, and Sinopec's subsidiary, Sinopec Shanghai Petrochemical Co Ltd, based on their equity shareholdings.

BP Chemicals controls 50 per cent of the venture, while Sinopec takes a 30 per cent stake, with Sinopec Shanghai Petrochemical taking the remaining 20 per cent.

Banks involved include China's four largest State-owned commercial banks - Bank of China, China Construction Bank, Industrial and Commercial Bank of China and the Agriculture Bank of China. Two international banks - the Hong Kong and Shanghai Banking Corporation and the Industrial Bank of Japan - are also involved.

The loan facility consists of a US$708 million term loan, an 8.1 billion yuan (US$979.4 million) term loan and a 963 million yuan (US$116.4 million) working capital facility.

Sinopec said the financing program was awarded the Project Finance Deal of the Year last year by Global Finance Magazine of the United States.

The 900,000-ton-a-year ethylene project is not only BP's largest investment in China but one of the largest of any other foreign companies in China in terms of investment.

All of the products are to be sold in the domestic market, where analysts believe demand is to double during the next decade. Construction is expected to start in the first half of the year, and the plant is scheduled to open in 2005.

Byron Grote, chief executive of BP's chemicals businesses, said SECCO is the strongest confirmation of BP's belief in China's future.

"It is a remarkable step for our business strategy in the growing Chinese market," Grote said.

(China Daily January 12, 2002)