BEIJING (Bloomberg) -- BP Plc. and China Petrochemical Corp. will probably agree this week to expand a chemical plant in southwestern China to meet demand in the world’s fastest-growing major economy, government and company officials said.

BP is in discussion with China Petrochemical, the nation’s biggest refiner, to expand the Chongqing plant, said a British government official and two people familiar with the talks. A “framework accord” may be signed by Jan. 18 during Prime Minister Gordon Brown’s visit to China later this week.
Chemical makers are competing to gain from rising demand in China, where the economy expanded more than 11 percent in the first three quarters of 2007. Foreign companies are boosting investments in chemical ventures because government curbs on fuel prices make oil-refining projects less profitable.
“BP is shifting its focus toward the chemicals sector as state limitations make the refining and fuels marketing business unattractive, especially with rising crude prices,” said Yin Xiaodong, a senior oil and petrochemicals analyst with Beijing-based Citic Securities Co.
Benchmark crude prices in New York have risen almost 80 percent in the last year, boosting raw material costs for refiners. Caps on fuel prices cost China’s state refiners including Sinopec Group, as China Petrochemical is known, more than $7.5 billion of losses in 2006.
----------------------------------------- Additional plant
BP, Europe’s second-biggest oil company, and Sinopec Group may expand the 350,000 metric ton-a-year acetic acid venture or build an additional plant in Chongqing, one of the officials said. Acetic acid is an industrial chemical mainly used in the production of paint, adhesive and printing ink.
“We are actively exploring new opportunities with our potential partners in China and will disclose relevant information at a proper time,” said Michael Zhao, Beijing-based spokesman for BP.
The Yangtze River Acetyls Co., or Yaraco, joint venture in Chongqing was formed in December 1995, costing $200 million. BP has a 51 percent stake and Sinopec Sichuan Vinylon Works, a unit of Sinopec Group owns 44 percent. A local government company has 5 percent, according to BP’s website.
The plant started operations in 1999 and the partners made a further investment of $25 million two years later in a separate 80,000 ton-a-year esters chemical plant, BP said in November 2005. The two companies expanded the venture’s acetic acid production capacity from 200,000 tons to 350,000 tons a year in 2005.
BP and China Petroleum & Chemical Corp., the listed unit of Sinopec Group, will begin operating another acetic acid venture in eastern China in 2009 to produce 500,000 tons of the chemical a year, Sinopec Group said in March last year.
The partners will each invest 250 million yuan for equal stakes in the venture that will be at Nanjing, the capital of the eastern province of Jiangsu, Sinopec said then.
China may use 25 percent of global chemical output by 2015, ExxonMobil Corp., the world’s biggest oil company, said in May.