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China Petroleum & Chemical Corporation, or Sinopec Corp., has proposed to build an ethylene plant in Qingdao, located in East China’s Shandong province.

The proposal is for setting up 1 million tons per year ethylene complex at a cost of 18.79 billion yuan (US$ 3.1 billion), according to the Ministry of Environmental Protection (MEP), Reuters reported.

Sinopec Corp. is one of the largest integrated energy and chemical company in China, and the proposed plan would help it counter the threat of ethylene imports from the US, where the upcoming shale gas projects would be able to produce ethylene at a price that is less than half the cost of production in the traditional naphtha-fed crackers in Asia.

Since China does not have any surplus natural gas, Sinopec would use both natural gas imports as well as LPG produced from its Qingdao subsidiary which produces 240,000 barrels per day.

If Sinopec’s project materializes, it would be the company’s first such gas-based ethylene complex. The MEP said it would take about three years time for the construction of the Qingdao complex after the work starts.

At present, China imports about 50 percent of its domestic ethylene demand. To meet the domestic demand, Sinopec may also try to produce from shale gas, according to experts.

Although China holds the world’s largest shale gas resource, it has so far not been able to replicate the production boom seen in the US, due to environmental and technological challenges, Reuters report stated.