The China National Offshore Oil Corp and its partner Royal Dutch/Shell have agreed to borrow US$2.7 billion for the construction of a joint petrochemical complex.

It represents the largest financing of a private project in the Asia-Pacific region.

The loan accounts for 60 per cent investment in the petrochemical project - also the largest single foreign investment in China's history.

The partners will equally pour the remaining 40 per cent, or US$1.8 billion, into the 50-50 joint venture (JV).

The plant, in Huizhou in South China's Guangdong Province, is due to commence operations in 2005. By then, it is expected to be able to make 800,000 tons of ethylene and 2.3 million tons of chemical products a year.

"The financing for the project has set a benchmark for financing in the Asia-Pacific region," the China oil corporation said in a statement on Friday.

Among the loans, Chinese banks are providing about US$2 billion and eight foreign banks, including the Japan Bank for International Co-operation, the Export-import Bank of the United States and Gerling NCM of the Netherlands, are offering US$700 million.

Chinese banks have also pledged an additional US$250 million in loans to be used when the construction of the project is near completion. It is likely to increase the total loans to US$3 billion, the statement said.

According to the statement, annual sales of the JV are expected to reach 1.7 billion yuan (US$205 million) upon completion of the project.

China imports half of the ethylene it needs. Ethylene is the basic petrochemical used in products ranging from compact discs to clothing.

Industry analysts say Chinese demand for ethylene should grow by more than 7 per cent a year in the near future, buoyed by healthy economic growth.

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