Foreign Confidential ™

China's largest joint venture with a foreign company is plagued by politics and environmental concerns.

The proposed $9 billion Sino-Kuwaiti oil refinery and petrochemical complex in Guangdong province has been held up by mounting concerns over the environmental impact on the area, which is home to 95 million people. The proposed site in Nansha, a suburb of Guangzhou, is close to state protected wetlands and the densely populated and already polluted Pearl River Delta region, including Hong Kong and Macao.

Kuwait Petroleum International has teamed up with China’s biggest oil refiner Sinopec Corp. to develop the project. But powerful Communist Party officials have turned it into a political football, according to China Confidential sources in Hong Kong. They say one official wants the site moved again--it was already forced out of Huangpu, another Guangzhou suburb--to benefit a group of well-connected investors.

Another party official is said to be using the project, which has been mired in controversy since its inception in 2005, to press for the ouster of some Sinopec senior managers.

The planned refinery will be capable of processing 300,000 barrels per day of Kuwaiti crude. An ethylene cracker unit will have an annual production capacity of 1 million tons.

Kuwait’s crude oil exports to China increased 43% in March from a year earlier to 177,000 bpd, providing 4.6% of China’s total crude oil, according to government data.