BP is taking advantage of rising demand from the China market to heavily invest in the production of purified terephthalic acid (PTA), as well as look for oil refinery investment opportunities.
The British oil and petrochemical giant and its local partner, Zhuhai-based Fu Hua Group, poured US$400 million into phase two of its PTA project in the southern coastal city. BP holds an 85 per cent stake in the joint venture.
The construction of the world's largest single train PTA unit, with a capacity of 900,000 tons per year, began on Friday after it gained official approval from the central authority in late April.
When it's completed at the end of 2007, the combined capacity of BP's Zhuhai investment could reach at least 1.4 million tons per annum, making it the country's largest. All the products will supply the domestic market.
"We are committed to growing in China, the world's largest PTA market. This new unit at Zhuhai is an important part of that growth strategy," Dave Miller, president of BP's global PTA business, said.
China's booming textile industry has prompted many petrochemical enterprises to begin producing PTA, a midstream petrochemical that can also be used for the production of bottles, packaging and film products.
In China, 90 per cent of PTA production is used in the textile industry, said Miller.
Government statistics show that China's PTA consumption exceeded 10 million tons last year, of which only around 52 per cent was supplied by domestic production.
Despite a growing number of competitors in the area, Miller said the market is still prosperous since demand is growing at a two-digit rate.
The application of new technologies allows the new unit to be more cost-effective and firmly gain a competitive position, he added.
Compared to conventional PTA technology, phase two of BP Zhuhai will require much less energy to operate, will reduce greenhouse gas emissions by 65 per cent, liquid waste discharges by 75 per cent and solid process waste by 40 per cent.
Meanwhile, more than 50 per cent of the new unit's material and equipment will be sourced within China, which could cut costs greatly, said Miller.
He noted that the company may make further investments in Zhuhai's PTA project, which was initially planned to be phased in via a four-stage development. The company would also look for other opportunities for PTA production outside Guangdong Province, where Zhuhai is located.
Steve Welch, newly appointed global vice-president of BP who oversees Chinese business, said the company is interested in investing in oil refineries in China.
With oil refineries, BP could directly produce paraxylene (PX), a raw material for making PTA. Currently, the company imports PX at a high price for its PTA production in China.
BP has held a number of discussions on oil refinery investment over the past few years, Welch told reporters, adding that a deal can be expected in the near future.
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