The nation's biggest oil company PetroChina is likely to get the final go-ahead to build a US$1.6 billion oil refinery in Southwest China's Guangxi Zhuang Autonomous Region within four to six months.

The new refinery, designed to process Sudanese oil with a capacity of 10 million tons a year, received approval from the State Environmental Protection Administration on environmental requirements two weeks ago, said Pan Wenfeng, a division chief in charge of industrial projects at the Guangxi Development and Reform Commission.

The new refining project aims to meet local market demand and highlights PetroChina's aggressive expansion into the south where its domestic rival Sinopec already has a strong presence, analysts said.

A senior official from PetroChina's refining and sales division yesterday confirmed the project's latest development to China Daily.

"PetroChina and industry experts have to undergo various procedures including a feasibility study before getting final approval from the National Development and Reform Commission, and that process will possibly take four to six months," Pan told China Daily yesterday.

The refining facility, to be set up in the coastal city of Qinzhou in the southwestern autonomous region, will involve a total investment of up to 13 billion yuan (US$1.6 billion), the official said.

It is expected to come on stream by 2008 and realize a sales volume of 28.3 billion yuan (US$3.5 billion).

Sudan is so far one of the most important overseas markets for Hong Kong-listed PetroChina's parent company China National Petroleum Corp (CNPC). The oil firm last year produced 16.38 million tons of crude oil from its assets in Sudan and found new reserves of 78.6 million tons, CNPC said on its website.

Consumers in Guangxi now use oil products such as gasoline and diesel from Sinopec's refineries in neighbouring Guangdong Province.

"With huge local demands, PetroChina's refinery in Guangxi has a very good market prospect," said Liu Gu, a senior oil and gas analyst with Shenzhen-based Guotai Jun'an Securities (Hong Kong) Ltd.

To meet surging domestic demand and banking on speculation that the central government will continue raising domestic oil product prices to move closer to the international level, China's oil majors are vying to expand their refining facilities with ambitious long-term targets.

An industry plan issued by the National Development and Reform Commission in March called for the addition of at least 90 million tons annually of new refining capacity by 2010, up 31.6 per cent from the 285 million tons of crude oil refined in 2005.

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