OREANDA-NEWS. September 30, 2013. A Pound 4 billion oil refinery and chemical plant outside the small Chinese city of Pengzhou has become the focus of an investigation that reaches to the highest levels of the Communist party, writes Malcolm Moore.

 It is one of the costliest and most notorious projects in the history of the Chinese oil industry.

And now, just weeks before it becomes fully operational, a ?4 billion oil refinery and chemical plant has become the focus of a corruption investigation that reaches to the highest levels of the Communist party.

Investigators arrived at the gates of the enormous plant, which sits surrounded by farmland near the city of Pengzhou, in the first half of August, according to one source with links to the local government in the nearby city of Chengdu.

Since then, they have mapped a web of corruption that radiates out through Sichuan province and then up to one of China's most powerful families.

"The whole team who handled this project was corrupt, not just two or three officials like normal," said the source.

 "In a short time, there should be some arrests. Many officials in Sichuan have been told not to go abroad [in case they flee]. The level of secrecy around the investigation is very high at the moment, but I believe they may release the amounts embezzled by officials, and that it could be a record sum."

The decision to build a giant refinery and chemical plant in Pengzhou was controversial from the beginning, in 1999, when Beijing chose the city to be a petrochemical base for Western China.

The site lies near one of China's most active earthquake fault lines, which produced huge quakes in 2008 and again this year.

Because Pengzhou sits in a basin, there is little wind to disperse any airborne pollution, and the refinery is so remote that a 550-mile-long pipeline had to be built to feed it with crude oil.

Nevertheless, the local government lobbied hard for Pengzhou to be chosen, sending millions of yuan every month to Beijing to seduce executives at China National Petroleum Corporation (CNPC).

"It reached the point that the oil company bosses became quite scared when they saw the representatives from the local government because they would be invited to fancy restaurants and they really did not want to be cornered into giving them the project," he said.

A second source inside the petrochemical industry confirmed the investigation into Pengzhou. "This project is very politically sensitive now," he said.

Both men also pointed to the ultimate target for investigators: Zhou Bin, the son of China's former security chief, Zhou Yongkang, who pulled the necessary strings to approve the project.

"It was Zhou Bin who acted as the middleman and helped the local government to land this project," the first source said.

As a reward, a firm which the 37-year-old secretly controlled, Wison Engineering, was chosen to build the plant.

In March, Wison announced that it had finished the construction of six units of the enormous complex, which are now in trial operations.

The size of Wison's contract has not been disclosed, but the company depended on CNPC for an average of 70 per cent of its revenues between 2009 and 2011, winning contracts worth 820 million pound from the state oil giant.

Wison said at the end of last week that it cannot now contact its chairman, Hua Bangsong, and that investigators have seized files from its offices and frozen some of its bank accounts.

Zhou Bin was reported by the Financial Times to have left China recently and to now be in the United States.

As the son of a member of the Politburo Standing Committee, Zhou Bin was able to parlay influence into business deals, according to several sources.

"He established a number of proxy companies, especially to supply construction materials to the energy sector, selling goods at a high price which he claimed were imported or environmentally friendly," said the first source in Chengdu.

Two other sources, one with close links to Mr Zhou's family, said he had been involved in a property development project in the northeastern city of Tianjin with Wen Yunsong, the son of the former Chinese premier Wen Jiabao. However, the relationship between the two men is believed to have later soured.

Zhou Bin's father, Zhou Yongkang, spent decades in the oil industry himself, and was the party secretary of Sichuan when the Pengzhou project was first mooted.

He later ran all of China's police, armed police, spies and law courts, making him one of the country's most powerful leaders before he retired at the end of last year.

The investigation at Pengzhou is either aimed directly at him, or at destroying his power base, the sources said.

One of Zhou Yongkang's closest aides, 64-year-old Guo Yongxiang, was detained at the end of August. According to the first source, he was a key figure in the Pengzhou project. "He ran the process to secure approvals and also managed the seizure of the land for the construction," he said.

The construction of the Pengzhou plant proceeded in the face of severe environmental concerns and its critics have been mercilessly targeted by the government.

"Everyone around me is against this project," said one employee of a government company in Chengdu, who asked only to be identified by his surname, Zhang. "But we seldom say it in public because we all know the local government will not tolerate different opinions on this."

Earlier this year, Chengdu mobilised a heavy response to a planned protest, going as far as to alter the working week. On Saturday, the morning of the protest, schoolchildren were forced to return to class and employees at government-run companies were told to attend meetings.

Zhen Rong, a 39 year-old activist from Chengdu said her parents had been visited by the police simply because she tweeted that, while a protest was unadvisable, the project should still be more transparent.

"I have a friend in Chengdu who knows some of the workers at CNPC," she said. "Even they do not think the project should have been built there."

The lines between politics and the energy industry have often blurred in China. Other oil executives who have enjoyed political careers include Wei Liucheng, the current party secretary of Hainan province, Su Shulin, the governor of Fujian province, and Jiang Jiemin, the former chairman of CNPC and previously the vice governor of Qinghai province, who has himself been detained in the ongoing investigation.

CNPC did not respond to requests for comment. It was not possible to contact Zhou Bin or his father Zhou Yongkang. Wen Yunsong did not respond to a request for a comment.