By Chen Aizhu

SINGAPORE (Reuters) – China is reviving a $20 billion petrochemical project in eastern Shandong province as part of efforts to dial up infrastructure spending to support an economy struggling with the impact of the coronavirus pandemic, two China-based industry sources said.

The 400,000 barrel-per-day (bpd) refinery and 3 million tonne-per-year ethylene plant in Yantai, Shandong, the country’s hub for independent oil refineries, was proposed years ago but approval has been slowing in coming because of China’s struggle with excess refining capacity.

China’s state planner, the National Development & Reform Commission (NDRC), gave initial approval on Monday for the project, allowing Shandong province to start planning for construction, said the sources with knowledge of the approval.

A representative for the project, Shandong Yulong Petrochemical, did not immediately comment. The NDRC did not immediately respond to a Reuters’ request for comment.

Shandong Nanshan Group, a private aluminium smelter based in Yantai, will be the lead investor of the nearly 140 billion yuan ($20 billion) venture, and other investors include chemical group Wanhua and the Shandong provincial government, said one of the sources.

The two sources declined to be named as they are not authorized to speak to the media.

The project could help cut China’s petrochemical imports but would likely worsen its surplus of refined fuel products.

Shandong’s refining sector has become less competitive in recent years after the start-up of large integrated petrochemical projects like Hengli Petrochemical’s Dalian plant and Zhejiang Petrochemical Corp’s Zhoushan complex.

The Yulong project will be the latest addition to China’s recent wave of petrochemical investments, which have been led by the private sector and drawn global giants like BASF (DE:) and Exxon Mobil (N:) to build complexes in the world’s top petrochemical consumer and importer.