The plant, in which Royal Dutch/Shell and CNOCC will each own 50 per cent, is being developed in Guangdong's Daya Bay, with construction to begin early next year. The project will produce 2.3 million tonnes of petrochemical products annually, and be fully operational in the third quarter of 2005.

While many industry analysts consider the move a risky one by the European oil giant, China imports half of the petrochemical products it uses and demand is expected to increase substantially in the next few years in line with a growing economy.

The deal is the latest in a string of agreements by CNOCC with western oil companies as it pursues an aggressive expansion plan. Some of the recent agreements include giant farm in deals with Australian and Indonesian gas producers.