SK Energy, South Korea's largest oil company, said it will buy a 35 percent stake in a joint petrochemical project with Sinopec in Hubei province.

The two companies signed a framework agreement to form a joint venture, SK Energy said in a statement.

The plant, located in Wuhan in Hubei, will have an annual capacity of 800,000 tons. It is already under construction and will come onstream by the end of 2011, said the statement.

The South Korean company did not disclose the investment in the project. Sinopec declined to make any comment.

The deal, which coincides with South Korean President Lee Myung-bak's visit to China this week, makes SK one of the few foreign firms to invest in China's huge petrochemical industry.

Earlier this month, China National Petroleum Corp (CNPC), the country's largest oil company, signed an agreement with Nippon Oil Corp to build a refinery in Osaka.

The two companies signed a memorandum of understanding in Tokyo for a joint venture project that will have a processing capacity of 115,000 barrels a day, according to CNPC.

CNPC said the collaboration with Nippon Oil is "the largest cooperation program between China and Japan in the energy area in recent years".

Sinopec in December started building an ethylene plant with an annual capacity of 800,000 tons in Wuhan, the first such large-scale project in central China.

The company earlier said it planned to spend about 16 billion yuan expanding plants in central China. Capacity at the Changling refinery in Hunan province will be doubled to 10 million tons a year by 2010 at a cost of about 10 billion yuan, a company source told China Daily.

It will spend 6 billion yuan upgrading its Baling plant, which uses output from Changling to make chemicals, said the source, who declined to be named.

Analysts said Sinopec's project expansion in central China shows the company's concern about the rising fuel demand in the region, which lacks large oil projects.

Foreign energy companies are increasing their expansion in China's petrochemical industry. Sinopec and German chemical company BASF earlier reached an agreement to invest $900 million in expanding their joint project in Nanjing, Jiangsu province.

(China Daily May 29, 2008)