China National Petroleum Corp (CNPC), the country's largest oil and gas producer, has got government approval to build a giant refinery in the southern Guangdong province.

The project will be located in Jieyang in southeast Guangdong, and will process over 10 million tons of crude annually, said a CNPC official who declined to be named. This will be CNPC's first oil refining capacity in China's southeastern coast.

The refinery also got the nod from the National Development and Reform Commission. At present, CNPC is conducting detailed research on the project site, said the official.

The project would likely use heavy oil from Venezuela, the domestic media reported. China and Venezuela last year signed an agreement to jointly develop the heavy oil resources in Venezuela and build a refinery to process the oil in China.

"The refinery will help CNPC better tap the rising demand for petrochemical products in the Pearl River Delta region," said Cai Enming, an executive with China Petroleum and Chemical Association. As one of China's economic powerhouses, the region has seen its demand for gasoline and diesel increase quickly in the past years.

Today, most of CNPC' oil refineries are located in the northeastern and northwestern regions of China. "The cost would be too high for CNPC to transport its products from these refineries to Guangdong," said Cai.

China's two other leading oil companies, Sinopec and CNOOC, already have giant refineries in Guangdong. Industry insiders said CNPC's entry would intensify the competition.

According to a three-year plan (2009-11) for China's oil and gas industry development, the nation will speed up the construction of oil refining bases. By 2011, it is expected to have a total annual refining capacity of 440 million tons.

Before 2011, China will also expand its refinery projects in Zhenhai in Zhejiang province and Maoming in Guangdong. It will start building large-scale refinery projects in Sichuan province, Guangzhou in Guangdong province, Quanzhou in Fujian province and Shanghai. The country will also accelerate the joint venture projects with Venezuela, Qatar and Russia.

Refinery projects at Ningbo in Zhejiang province, Shanghai and Nanjing in Jiangsu province will have an annual capacity of 30 million tons by 2011. Projects at Maoming, Guangzhou, Huizhou, Quanzhou, Tianjin, Caofeidian will also have an annual capacity of 20 million tons, according to the plan.

(China Daily February 27, 2009)