OREANDA-NEWS. May 15, 2013. The government of Yunnan province in southwestern China plans to develop its provincial capital Kunming into a petrochemical refining and production base, Guangzhou's 21st Century Business Review reports.

Under the scheme, part of Beijing's latest five-year economic development plan from 2010 to 2015, the country's largest state-owned oil and gas producer China National Petroleum Corp (CNPC) will build an oil refinery in the province with a projected annual capacity of 10 million tonnes, according to the local government.

The refinery is one of a series of projects planned for the city but the local government has made no mention of the 2006 plan for the chemical company Yunnan Yuntianhua to produce 650,000 tonnes of the chemical compound p-Xylene and 1 million tonnes of terephthalic acid locally.

Officials have assured local residents that environmental protection and safety procedures will be a priority but many worry that once construction of the oil refinery begins, the local government will be left powerless to supervise and regulate the large state enterprise.

Yunnan, a scenic and mountainous province, and its capital Kunming are popular destinations for domestic tourism. The potential for developing the area's tourism and recreation industries has however been set aside due to the province's proximity to neighboring Myanmar. China and Myanmar have agreed to build a USD2.5 billion oil-and-gas pipeline project connecting the Indian Ocean with southwest China, estimated for completion in May this year.

The new pipeline will reduce China's dependence on energy supplies transported through the Strait of Malacca, giving it a shorter and alternate supply route that also helps avoid potential military obstacles from the United States. The 1,100-kilometer-long pipeline has an estimated annual transport capacity of 22 million tonnes, while the natural gas pipeline has an annual transport capacity of 12 billion cubic meters. The channels will significantly increase the energy supply to the country's less developed southwestern regions.

CNPC led the design, construction and operation of the pipeline, while the Kunming government is eyeing the benefits from growth in production capacity and tax revenues.

Under the province's plan, once the pipeline begins pumping gas, the petrochemical and refining base in Kunming will be able to make more than 200 billion yuan (USD 32.4 billion) a year by 2020.

Last year, Yunnan's GDP exceeded 1 trillion yuan (USD 162 billion), while Kunming's GDP totaled 300 billion yuan (USD 48.6 billion).