Saudi Arabia reaffirmed its interest in the Chinese market with a deal to build a $10 billion refining and petrochemicals complex as it vies for crude-oil customers with fellow OPEC members and Russia.
Saudi Arabian Oil Co., or Aramco, agreed to set up a joint venture with two Chinese companies to develop the facility in Liaoning province, according to a statement Friday. Saudi Arabia is investing in energy assets across Asia, the world’s biggest oil-consuming region, as it battles for market share.
The kingdom will supply as much as 70 percent of the crude needed by the new complex, which will include a 300,000-barrel-a-day refinery, an ethylene cracker and a paraxylene unit, the statement shows. The deal, signed while Crown Prince Mohammed bin Salman is in Beijing, follows recent Saudi pledges to fund projects in India and Pakistan, as well as agreements to invest in South Korea’s Hyundai Oilbank Co. and a petrochemical complex in Malaysia.
The slew of Asian partnerships formed by state-run Aramco comes as Saudi Arabia plays catch-up with Russia, which has topped the kingdom in oil sales to China in the past couple of years.
The Saudis will team up with China North Industries Group Corp., or Norinco, and Panjin Sincen to form an entity called Huajin Aramco Petrochemical Co., according to Friday’s statement. The project is expected to start operations in 2024.
“Our agreement today with Norinco and the Liaoning province is a clear demonstration of Saudi Aramco’s strategy to move from beyond a buyer-seller relationship, to one where we can make significant investments to contribute to China’s economic growth and development,” Chief Executive Officer Amin Nasser said.
Saudi Aramco will take a 35 percent stake in the new company, while Norinco and Panjin Sincen will hold 36 percent and 29 percent, respectively. The ethylene facility will have an annual capacity of 1.5 million tons and the paraxylene unit, 1.3 million tons.
Aramco also plans to establish a fuel-retail business in China, according to the statement. By the end of 2019, a “three-party marketing JV” is expected to be formed between the Saudi company, North Huajin and Liaoning Transportation Construction Investment Group Co. to develop a filling-stations network, it said.
An initial framework agreement for the Liaoning refinery was signed during Saudi King Salman bin Abdulaziz’s visit to Beijing in 2017. Then in October last year, the Saudis said they would also acquire a share of a 400,000-barrel-a-day plant on Zhoushan island in Zhejiang province, and committed to supplying the Rongsheng Group-run refinery with a portion of its crude requirements.
On Friday, Aramco said it had now signed memorandums of understanding to expand its downstream presence in Zhejiang, including taking a 9 percent stake in the Zhoushan complex.