Asia's top refiner Sinopec is planning a new joint venture refinery and petrochemical complex to consolidate its foothold in South China.

"We are right on track, negotiating with overseas partners to build a refinery and petrochemical complex in Guangdong Province. Its processing capacity will be 12 million tons, while the petrochemical plant will roll out 800,000 to 1 million tons of ethylene (a year)," Sinopec President Wang Tianpu said on Friday.

By "overseas partners" Wang meant Royal Dutch Shell, Kuwait Petroleum Corp and Dow Chemical Co.

Shell didn't comment on the planned project. Instead, it only said it was interested in any opportunity to drive up its business in China.

The project, if it goes ahead, will create pressure on China National Offshore Oil Corporation's (CNOOC) refinery in Guangdong and the nearby $4.3-billion Nanhai petrochemical complex built by Shell and CNOOC, analysts said.

A CNOOC press manager conceded the Sinopec project will heighten competition. But CNOOC is still confident of South China's market potential and its own differentiated market strategy.

"The Guangdong and South China market as a whole is robust enough to accommodate more oil products and petrochemicals. The region has a robust demand for oil because of its fast economic growth. The manufacturing industry there too needs petrochemical products in large amounts," the CNOOC official said.

More importantly, CNOOC's refinery and petrochemical plant in Guangdong is different from those of its competitors' because it uses heavy oil as raw material and rolls out high-end ethylene products, the official said.

China Daily has learned that Sinopec incurred a loss in processing of crude into oil products in July because of soaring global oil prices.

Higher oil prices have created pressure on Sinopec's refineries, deputy chief financial officer Liu Yun said on Friday.

Despite that it has not asked the government to raise fuel prices, he said.

Sinopec is running its refining units at full capacity and made a profit from processing oil in the first half, Liu said.

Sinopec Chief Financial Officer Dai Houliang said the company would meet its full-year oil-production target because it had increased its output in the second half. Also, the firm is expected to raise the output of higher-priced chemical products, Bloomberg quoted Dai as saying.

(China Daily August 11, 2007)