BP set for petrochemicals expansion

BP will proceed with a major petrochemicals expansion project in China and is considering building another large plant in Asia's most populous country.

The decision, announced on Thursday, is the latest indication that the UK oil group, which has shed billions of dollars of assets in recent months to help pay costs related to the Macondo oil spill last year, retains the financial capacity to invest heavily in strategic projects.

In its oil refining and chemicals business, that includes initiatives to give the company an edge in the increasingly competitive Chinese market.

BP said it would invest in "debottlenecking" one of two plants producing purified terephthalic acid (PTA), the raw material used to make products such as plastic bottles and synthetic fleece, at the BP Zhuhai Chemical Company site in China's Guangdong province.

BP Zhuhai is a joint venture between BP and China's Zhuhai Port Company in which BP holds an 85 per cent interest. The enterprise was formed in 1997, and its two PTA plants have been operating since 2003 and 2008 respectively.

The debottlenecking project would increase the annual PTA output capacity at the Zhuhai site by 200,000 tonnes to 1.7 million tonnes by the first quarter of next year, BP predicted.

Pre-engineering studies are underway for a third PTA plant at Zhuhai which could come on stream as early as 2014 to meet growing Chinese demand for the chemical.

"This investment will be the world's largest single train [production unit] PTA plant, built in the world's largest and fastest growing PTA market with the world's best and lowest cost technology - once again reinforcing BP's commitment to the PTA business and to China," said Sue Rataj, the chief executive of BP's petrochemicals division.

The plant would have a capacity of 1.25 million tonnes per year, making Zhuhai BP's largest PTA site worldwide, the company said.

BP did not disclose how much it planned to invest in expanding PTA capacity in Zhuhai, but development costs are likely to run to billions of dollars. The company said its previous investments in China approached US$5 billion (Dh18.36bn).

BP is one of the world's largest PTA producers with combined output capacity from 21 plants of more than 10 million tonnes per year. Between them, the plants command about 15 per cent of the global market. Along with it main competitors, the company has been shifting its chemicals investment focus from North America and Europe to Asia in recent years, with an emphasis on China. That country recently became the world's second-biggest economy after the US, overtaking Japan.

New chemicals plants built close to the Chinese and other rapidly expanding Asian markets are offering keen competition to large-scale petrochemicals developments in the Gulf .

Last month, Saudi Basic Industries (Sabic) awarded a contract to China's Sinopec Engineering to build a new polyethylene terephthalate (PET) plant at Sabic's petrochemicals complex at Yanbu on the Gulf coast, more than doubling annual PET output capacity at the site to 750,000 tonnes from 330,000 tonnes by early 2013. PET is the main plastic made from PTA.