Top oil producer PetroChina is set to build another gigantic refinery and an ethylene plant inSichuan Province.

The energy conglomerate inked a strategic framework agreement with the provincial government in Beijing yesterday to set up the downstream facilities in Chengdu, capital of Sichuan, Zhang Ping, a senior press official of the China National Petroleum Corporation (CNPC) PetroChina's parent company told China Daily.

According to industry insiders, the deal involves an investment of more than 50 billion yuan, with the ethylene cracker costing around 20 billion yuan.

The ethylene facility plan has been given a green light by China's top economic planner, but it's not clear if the refinery has got the official approval from the National Development and Reform Commission (NDRC).

The refinery will process 10 million tons of oil every year. The ethylene plant will produce 800,000 tons of the chemical annually, Du Qinglin, Party secretary of Sichuan, was quoted by Bloomberg as saying yesterday.

The NDRC this year approved a new PetroChina refinery in Guangxi, with an investment of 15.2 billion yuan and a planned processing capacity of 10 million tons. It's supposed to supply fuel to not only Guangxi, but also Yunnan and Guizhou provinces.

"Both facilities will better meet the rising demand from the southwestern region. As the western part of China attracts more investments for development, the southwest will witness robust demand for fuel and chemical products. So, it makes sense to plan new projects there," said Han Xuegong, a CNPC analyst.

Western China boasts sufficient energy facilities, but lacks downstream processing capabilities, such as refineries and crackers. "Therefore, it is of strategic significance to set up downstream facilities there," the analyst said.

Western China's abundant oil and gas reserves will secure the raw material supplies for PetroChina's planned refinery and cracker, Han added.

Huang Wensheng, spokesman of Sinopec, Asia's top refiner, declined to make any comment specifically on PetroChina's plans in Southwest China.

But he said that before building a cracker, any company has to be sure about its potential clients.

"Also, price and product quality are key elements to the success of downstream business," Huang said.

Source: China Daily