CHINA Petroleum and Chemical Corp (Sinopec) and Saudi Basic Industries Corp agreed yesterday to form a joint venture for a US$1.7 billion petrochemical project in Tianjin.

The 50-50 venture will invest in a one million-ton-per-year ethylene derivatives complex, including 600,000 tons of polyethylene and 400,000 tons of ethylene glycol, SABIC said in a statement yesterday.

The petrochemical plant, scheduled to be completed by September 2009, will receive all its ethylene feedstock from an ethylene cracker owned by Tianjin Petrochemical Co, a branch of Sinopec.

Ethylene is a key petrochemical building block.

The heads of agreement was signed yesterday in Beijing by Sinopec Chairman Su Shulin and Prince Saud bin Abdullah bin Thenayan Al-Saud, SABIC's chairman.

Prince Saud said this will be SABIC's first joint venture in China and he hopes it will lead to more.

SABIC already has a strong relationship with Sinopec, while Chinese engineers from Sinopec are helping construct a world-scale polyolefins complex for SABIC affiliate Yanbu National Petrochemicals Co in Yanbu, Saudi Arabia, the statement said.

The Tianjin facility is an important component in SABIC's corporate strategy of being among the world's top petrochemical companies by 2020, said Mohamed Al-Mady, SABIC's chief executive officer.

Asia could account for half of the world's demand for key petrochemicals by 2015, with China alone representing 25 percent, Jim Harris, senior vice president for ExxonMobil Chemical, said last year in Shanghai.

Over the next decade, 60 percent of the world's petrochemicals growth will occur in Asia and more than one-third in China, the US firm said.