CNOOC, China's third-largest state-run refiner, has started building a 60,000-barrel-per-day crude processing facility in eastern China, to boost its still nascent refining and fuel marketing business in the world's second-largest oil market.

The new facility, to be built in Taizhou city of Jiangsu province, costs 10.2 billion yuan ($1.6 billion) and is slated to begin operations in 2015, company officials and local media said.

Company officials said the new investment, including 10 main processing facilities, would be on top of an existing plant at the same site that produces mainly asphalt and fuel oil.

CNOOC, parent of offshore oil and gas specialist CNOOC Ltd , is operating its first major oil refinery in Huizhou of southern Guangdong province, with a capacity of 240,000 bpd.

CNOOC plans to add 200,000 bpd of refining capacity in Huizhou by around 2014.

Even with the expanded capacity, CNOOC's Huizhou plant would represent less than 4% of China's current total refining capacity of some 11 million bpd.

China restricts new investments in refineries smaller than 100,000 bpd which it deems inefficient in a sector dominated by the country's twin oil giants PetroChina and Sinopec.

CNOOC calls the Taizhou investment an "integrated petrochemical project" instead of a "refinery", saying it would become a key lubricants producer, China Energy News reported on Monday.

It would also produce feedstock oil for petrochemicals, liquefied petroleum gas and fuel oil, the paper said.

One company official said the new plant would process heavy crude oil pumped from China's Bohai Bay, off north China, the main crude producing area for CNOOC.

In the same city Taizhou, CNOOC operates a separate plant of asphalt, or bitumen, of a similar capacity of 1.5 million tons a year, according to a Taizhou local government website.