China Petroleum & Chemical Corporation (Sinopec) and German chemical company BASF have reached an agreement to spend $900 million to expand their joint project in Nanjing, Jiangsu province, in a move to tap the growing demand in the domestic market.

The two companies have submitted the technical and commercial feasibility study for the expansion, said a statement from Sinopec yesterday.

The project includes the expansion of the steam cracker from 600,000 to around 750,000 tons of ethylene per year. It also includes the expansion of manufacturing facilities of other petrochemical products such as ethylene oxide derivatives.

These expansions are expected in phases starting this year. The cracker expansion is scheduled between 2009 and 2010, said the statement.

"The completion of this feasibility study marks an important step in the cooperation between Sinopec and BASF ... it is expected to make a significant contribution to meet the domestic market demand," said Wang Tianpu, president of Sinopec Corp.

The project will further increase the production capacity of Sinopec, said Yin Xiaodong, an analyst with CITIC Securities. China, which imports half of its ethylene needs, aims to more than double production capacity of the chemical to 18 million tons by 2010.

The expansion strengthens BASF's close partnership with Sinopec. It is another significant demonstration of the company's commitment to China's chemical market, said Martin Brudermller, member of the board of executive directors of BASF.

BASF and Sinopec in 2000 agreed to set up their 50-50 joint venture, BASF-YPC Co Ltd, in Nanjing. The first phase of the project amounts to $2.9 billion. The project started commercial production with a steam cracker and nine downstream plants in June 2005.

The site also has a gas-fired power plant and an international port on a tributary of the Yangtze River.

Sinopec now has 10 ethylene plants with a total capacity of 6.1 million tons by the end of 2006. Its seven sets of ethylene crackers have an annual capacity of over 600,000 tons.

(China Daily March 20, 2008)