CHONGQING - World-leading chemical maker BASF SE officially started on Monday the construction of an environmentally safe chemical plant in China's ecologically fragile Three Gorges Dam area in southwest China.

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With $1.2 billion coming from BASF SE, the project is expected to cost $5.3 billion -- the largest investment in a petroleum and gas chemical project of any German company in central and western China.

With the State-owned Chongqing Chemical and Pharmaceutical Holding (Group) Company (CCDHGC) as its co-investor, the project is expected to realize an annual production value of 50 billion yuan ($7.64 billion) and generate 10 billion yuan in tax.

Its product MDI, a core PU raw material, is widely used in industrial production, including auto manufacturing and heat insulators for home appliances and shipping containers.

Martin Brudermueller, member of the board of executive directors of BASF SE, said that BASF SE would team up with CCDHGC to develop the plant into a world-leading green chemical plant.

Having set excellent safety records in its operation along the Rhine and Mississippi rivers and the Port of Antwerp, BASF SE would integrate its global production experiences into the Chinese project, he said.

Located in the Yangtze River's Three Gorges Dam area, the chemical plant has aroused public concern over environmental and other concerns.

Chongqing Mayor Huang Qifan said at the opening ceremony that the plant is using environmental standards that exceed both local and national benchmarks.

"This is going to be a highly safe chemical project," Huang said.