What do the top three Chinese ethylene producers - China Petroleum & Chemical Corp. (Sinopec), China National Petroleum Corp. (CNPC) and China National Offshore Oil Corp. (CNOOC) - have in common? Two things: state ownership/control and integrated business of oil drilling, refining and petrochemical production. Now, they are going to be joined by a new player with similar background: China North Industries Group Corp. (CNGG).

CNGG's subsidiary Liaoning Huajin Tongda Chemicals Co. Ltd. (Liaotong) is going to test its new 450,000-metric-ton ethylene project at the end of this month, which, depending on the test results, will be followed by an official launch.

While the project is smaller than the big three's facilities (up to 1-million-metric-ton each), it signifies CNGG's entry into the ethylene market and the completion of the oil drilling, refinery and resin production line. CNGG's subsidiary Zhenhua Oil Co. Ltd. will supply crude oil through a 140-kilometer pipe from the Yingkou port to Liaotong's base.

China's domestic ethylene industry touts a total production capacity of 10 million metric tons by 2008, 64 percent of which belongs to market leader Sinopec. CNPC claims another third of the total capacity, and CNOOC is ranked the third with its joint venture with Shell Petrochemical Co.

Unlike the big three, CNGG's main business is supplying to the Chinese military, but the company is gradually transitioning to high-tech civilian machinery and chemical products. With 99 subsidiary companies, it's also the fourth largest Chinese firm that's permitted to own overseas oil operations.

Publicly traded Liaotong expects the ethylene project to turn in up to 7.7 billion yuan (US$1.1 billion) of annual sales and 975 million yuan (US$143 million) of after-tax profit.
China still relies on export for more than 40 percent of its ethylene consumption.