Property developer-cum-energy firm Sino Prosper Holdings Ltd said yesterday it will invest approximately US$50 million in its bitumen oil project in Indonesia, to cash in on the mainland's surging consumption of heavy oil.

Located on the Buton Island, three hours' flight from Jakarta, the five-year project, which will begin commercial operation in June 2007, is estimated to have a total output of at least 5 million tons in five years. China Petroleum & Chemical Corporation (Sinopec) and China's Ministry of Communications have signed the underwriter contracts to be the sole distribution agent for the project for 10 years.

"China consumes much more energy than ever before. The demand for marine fuel, in particular, is rapidly growing," Sino Prosper's CEO Tang Yantian told reporters at a luncheon yesterday.

Marine fuel oil, also known as heavy oil, has a heavy ingredient of sulfur and is indispensable for transportation and heavy industries.

In 2004, China consumed a total of 44 million tons of heavy oil, half of which was imported.

Over the last 10 years, demand for imported heavy oil has been growing at a compound annual growth rate of 35 per cent, a Sino Prosper report said.

The extraction of bitumen at Buton Island is Sino Prosper's first resources project, but it "can be very risky and may weaken shareholder's confidence" if it sticks to only one project.

Tang said the company has another domestic resources project in the pipeline.

Sino Prosper has signed a memorandum to be the contractor of a coking coal exploiting project in Northwest China's Xinjiang Urgur Autonomous Region early this year.

The company will pump in 380 million yuan in the project, and is expected to produce 1.8 million tons of coking coal in the first phase. Plans for the second phase are still pending.

Established in 1992 in Dalian, Northeast China's Liaoning Province, Sino Prosper began as a property developer. It was listed on the Hong Kong Exchange's main board in 2002, when it recorded a turnover of HK$113 million (US$14.5 million) and a net profit of HK$27.8 million (US$3.56 million).

However, its turnover dropped by about 80 per cent the next year due to the cooling down of the mainland's property market.

The company later diversified into other lucrative markets, with the energy sector topping their agenda.

(HK Edition 03/02/2006 page3)