BP Amoco and Sinopec open $200m China plant

01 February 1999 00:00  [Source: APC]

BP sold its first acetic acid licence in China six years ago. Last month it launched its largest on-shore investment in the country, a $200m acetic acid project which also happens to be the largest ever foreign investment in China's interior.

The Yangtze River Acetyls Company (Yaraco) plant is at Chuanwei, near Chongqing, south west China. Yaraco is a joint venture between BP Amoco, which owns 51% of the company, and Chinese partners Sinopec, which has a 44% stake in the business, and local government representative, Chongqing Investment and Construction Company, which has the remaining share.

According to BP Amoco chairman Peter Sutherland, the 150 000 tonne/year plant 'demonstrates the excellent partnership we have forged with Sinopec and provides a firm foundation for further cooperation as the Chinese chemicals industry develops'.

Bob Baldwin, deputy plant manager, agrees: 'We were keen to invest in China, but only wanted to do it with a strong Chinese partner.'

The plant is located next to Sinopec's Sichuan Vinylon Works (SVW) a chemical and chemical fibres complex which was established in the 1970s to use locally available natural gas. BP Amoco is the first non-Chinese investor in this area and hopes to supply the local market. Across China, demand for acetic acid is growing at around 6%/year and the joint venture anticipates expanding in a bid to meet demand. The Yaraco partners hope that their investment will also attract interest in a range of downstream products.

The company employs 190 Chinese staff, while the project management team included a further 46 staff seconded from SWV along with seven expatriates from BP.

###7507###

Vince Pavitt, an operations integrity adviser brought in from Hull to work on the project over a year ago, says he has learned a lot from the experience: 'It's been an education for me seeing the plant under construction and gaining an understanding of the way in which Chinese people work together and solve problems.' The Lanzhou Design Institute from Gansu province and the Sichuan Design Institute were also involved in the project along with German firm Lurgi.

The acetic acid plant is modelled on Hull's A4 plant and it has been completed on time and according to BP, substantially under budget. This, says the company, is an impressive feat when the logistics of the project are considered.

Chuanwei is 40 miles over mountains from the city of Chongqing on the northern bank of the Yangtze river, 1000 miles upstream from Shanghai and its remote location caused some problems for the project management team. Much equipment for the plant was supplied from within China, but rotating machinery, the alloy vessels and pipework on the acid plant, and the most specialised instrumentation items, came from Europe and the US.

All these major deliveries had to be shipped to Shanghai and then carried by barge up the Yangtze where they were unloaded at the SVW dock and finally hauled to the site. But this method was not without its problems. During the rainy season in the summer, the water level can rise more than 20 metres and flood the jetty, making deliveries impossible.

But Sutherland has no trouble explaining why BP Amoco chose to invest in this relatively remote area of inland China: 'Chuanwei presented an ideal opportunity for our acetyls business. Gas and methanol feedstock is available from SVW, there is a skilled local workforce and the site is well-situated to supply acetic acid to customers in the interior of China.'

He adds that BP has a good working relationship with the local government which has been essential to the success of the venture: 'The relationship we have developed with the Chongqing government and the local community has been outstanding, which augurs well for the Yangtze River Acetyls company's future success in operating successfully and growing its market share.' Baldwin adds that the company made a conscious effort to avoid the increasingly crowded market of eastern China: 'We wanted to get away from the coastal regions - here, we're the only show in town,' he says.

He is also optimistic about the long term future for the project and for chemical investment in China. 'Consumer demand is still quite high,' he says, adding, 'it's holding its own.' He recognises though that the restructuring of the industry will mean some tough times ahead, but he is sure that China will be the better for it: 'It's inevitable that the surviving industry in China will be more efficient - who knows if it will be more competitive though?'The project clearly satisfies BP's strategic needs, but Baldwin admits that BP was also steered towards the area by the Chinese government which is very keen to increase investment in inland China and offered the company the full range of incentives available for major foreign investors.

He adds: 'Running a successful business in China depends very much on relationships. From BP Chemicals' other joint ventures in Asia. We have clear ideas for Yaraco but we cannot force our partners to accept them. We must gain their acceptance through understanding and respect.'

< previous article(ICIS Chemical Business podcast November 2, 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly