Multinational petrochemical giant Royal Dutch/Shell Group has received approval from China's State Council to build a multi-billion dollar joint venture in Guangdong after an eight-year wait. The plant - understood to be the largest Sino-foreign joint venture to date - could involve an investment of up to US$8 billion, sources said. A senior official at China Merchants Holdings - one of the project's shareholders - confirmed it had been given the green light following intense and sometimes difficult negotiations since a letter of intent was signed in 1989. Shell's Greater China corporate public affairs manager Jeremy Frearson said: 'There is no official approval yet. We continue to be optimistic about the project. We hope there might be one. The feedback we have up till now [from the Chinese authorities] has been positive.' According to a feasibility study, Shell will be the only foreign party in the project with a 50 per cent stake while China National Offshore Oil Corp will lead the mainland consortium with at least 25 per cent. China Merchants and Guangdong Provincial Investment and Development Co - an investment arm of the provincial government - will hold the balance. The original plan was to invest $6 billion in an eight million-tonne refinery and a 450,000-tonne ethylene manufacturing facility. A new feasibility study was submitted to Beijing in April which suggested proceeding with the project in two phases. Phase One would cost at least $4.5 billion while the cost of Phase Two has yet to be finalised. The timing of the construction of Phase Two would depend on economic conditions, Mr Frearson said. China Merchants Holdings, the commercial arm of the Ministry of Communications, is planning to double its stake in the project to 20 per cent, although the official said the total investment and shareholding breakdown had yet to be finalised. There are rumours Chinese Premier Li Peng will preside over the signing of the contract during his visit to the Netherlands in the middle of this month. 'If we were to get the official approval in the near future, then it will be possible for the petrochemical complex to be in production in 2003,' Mr Frearson said. He rejected suggestions there would be an oversupply in ethylene, saying studies showed domestic demand would continue to exceed supply and China would remain a net importer for the foreseeable future. The output from the Huizhou plant would be sold primarily in China's southeastern provinces, he said. He denied the project was delayed due to differences between the parties involved. Mr Frearson said: 'It's a long-term project, so we want to get it right from the start.' Shell also planned to launch other projects in the mainland such as importing liquefied natural gas and power generation. The firm's actual and committed investment in China is approaching $1 billion, including $600 million in oil exploration and production excluding the Huizhou project.