China National Petroleum Corp, China's biggest oil and gas producer, signed an agreement with the Yunnan provincial government in Beijing on Saturday to build an oil refinery in the province. The projected annual capacity of the refinery project – which is still awaiting final approval by the central government - is 10 million tons.

Since early October, Yunnan and other regions in southwestern China have been suffering from a severe oil shortage. Due to their lack of refining facilities and location issues, Yunnan, Guizhou and Guangxi have had to shut down some gas stations. In recent weeks the lack of diesel fuel in Yunnan has created long queues of trucks at filling stations - some stretching more than one kilometer.

According to the Yunnan Commerce Department, Yunnan will open all CNPC's gas stations within a week and the provincewide oil emergency shall be solved within 10 days.

CNPC's agreement with Yunnan in Beijing also includes oil and gas sales networks and biomass energy projects, and it plans to build an ethylene plant in Yunnan with a capacity of one million tons per year. To reduce China's growing dependence on oil shipped via the Malacca Strait, CNPC is considering extending a planned Myanmar-China crude oil pipeline, which is designed to carry crude from Sittwe in Myanmar to Kunming and then on to Chongqing.

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