China National Offshore Oil Corp is building a 300,000 tons-per-year bitumen plant in western China, marking its first such investment in the remote but fast developing region, company sources said Wednesday.

CNOOC, which produces 20 per cent of China's domestic bitumen output, will own 88 per cent of the US$36 million project in Sichuan Province and two local firms will own the remaining 12 per cent.

Bitumen, or asphalt, production is scheduled to begin by the end of June 2004.

China's rapidly expanding economy - the sixth biggest in the world - is generating demand pressures throughout the country, including for thousands of miles of new roads.

"Bitumen could be the fastest growing petroleum product this year, with apparent demand to top 20 per cent over last year," said Shen Ping, general manager at C1 Energy, a China-based energy markets consul-tancy. She estimated China's apparent bitumen demand, or domestic production plus net imports, at more than 10 million tons this year, of which imports would account for one quarter.

The government is also focusing major infrastructure work in the vast western region in a bid to close the wealth gap with the prosperous east coast.

"Key to developing the west is to improve transportation. That is why CNOOC has picked Sichuan as the new bitumen site," said a Beijing-based CNOOC media officer, who declined to be identified.

China's five-year economic plan for 2001-2005 includes building 200,000 kilometres of new roads, to bring total road length in the country to 1.6 million kilometres, the State Development and Reform Commission said on its Web site.

Most of the main routes planned head to remote western regions such as Tibet, Sichuan and Yunnan.

CNOOC's new plant in the city of Luzhou, banking the Yangtze River, will bring the company's total bitumen production capacity to about 3 million tons per year.

The firm, which started bitumen production in 1997, operates plants in the east coast provinces of Liaoning, Shan-dong, Jiangsu and Zhejiang.

"I won't be surprised to see China's bitumen demand grow by 1 million tons every year for the next 10 years," said a CNOOC bitumen manager.

Company officials estimated CNOOC's 2003 bitumen output would rise about 6 per cent to 1.75 million tons.

State-run CNOOC, parent of the listed CNOOC Ltd, produces bitumen using crude from the Bohai Sea offshore north China.

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