China's top economic planner has approved a plan by the China National Petroleum Corporation (CNPC) to build a huge refinery in Guangxi in South China.

With an investment of 15.2 billion yuan ($1.95 billion) and a planned annual processing capacity of 10 million tons, the proposed Qinzhou refinery in the Guangxi Zhuang Autonomous Region will be one of the core energy projects during the country's 11th Five-Year Plan (2006-10), CNPC said in a statement yesterday.

"It is expected to come on stream before 2008 and play a crucial role in the country's new energy grid," the National Development and Reform Commission (NDRC) said.

The project is the largest refinery in the southwestern part of the country. It is expected to better meet demands in the region and boost the refining industry, the NDRC said.

Zhang Zhiguo, a press official with Sinopec, said: "It will benefit the fuel-thirsty southwest, and is surely positive for the overall energy grid."

However, he admitted the refinery may impose some competition for Sinopec, Asia's largest refiner.

Once the project is completed, CNPC's fuel transport costs to the southwestern region will be reduced. As a result, the retail price will be more flexible within the government-set range, Zhang said.

Han Xuegong, an analyst with CNPC, said it was right for the NDRC to take the competition factor into consideration when reviewing new projects.

Sinopec previously wanted to build an 8-million-ton refinery in Guangxi. However, the NDRC did not approve the application.

"Guangxi plays an important role in serving as a bridge to import crude oil and export oil products to Southeast Asian markets. That is why the two firms are competing to have a foothold there," said Han Wenke, director of NDRC's Energy Research Institute.

The proposed CNPC refinery will also supply fuel to Yunnan and Guizhou provinces in Southwest China.

Source: China Daily