Saudi Aramco in China Refinery Project

30.03.2023 - Saudi Arabia is on a path toward establishing a major presence in the Chinese market. Saudi Aramco, the world’s biggest oil producer, said it plans to start construction on a large refinery and petrochemicals complex in northeastern China sometime in April.

The oil giant has also sealed a deal to acquire a small shareholding in the Chinese market’s downstream segment.

On the refinery project to be realized in Liaoning Province with facilities to include a 300,000 bbl/d refinery and a petrochemical plant with capacity for 1.65 million t/y of ethylene and 2 million t/y of paraxylene, Aramco will collaborate with Chinese firms North Huajin Chemical and Panjin Xincheng.

Norinco Group, parent company of North Huajin Chemical, will own the 51% majority shareholding in the complex, Aramco 30% and Panjin Xincheng the remainder.

With the agreement, Aramco is moving to revive a plan to become an all-inclusive source of energy and chemicals for China as Beijing seeks to ensure longer-term energy security. Plans for the project were halted in 2020 as the coronavirus pandemic clouded the outlook.

Speaking at the China Development Forum in Beijing at the beginning of the week, Amin Nasser, Aramco’s president and CEO, called the plans a “major win-win opportunity to build a world-leading, integrated downstream sector in China, with special emphasis on the high conversion of liquids directly into chemicals as part of our broader liquid-to-chemicals business expansion plan.”

Acquisition of 10% in Rongsheng Petrochemical

Separately, Aramco said it has signed definitive agreements to acquire a 10% interest in Rongsheng Petrochemical for the equivalent of $3.6 billion, thereby deepening its footprint in China’s downstream sector. Closing is expected by the end of 2023, subject to regulatory approval.

Through the deal transacted by wholly owned subsidiary Aramco Overseas Company (AOC), the Saudi major is poised to supply 480,000 bbl/d of Arabian crude oil to Rongsheng’s 51% affiliate Zhejiang Petroleum and Chemical (ZPC), under a long-term sales agreement.

Among other assets, Rongsheng owns a 51% equity interest in ZPC, which owns and operates the largest integrated refining and chemicals complex in China with capacity to process 800,000 bbl/d of crude oil as well as producing 4.2 million t/y of ethylene.

Mohammed Y. Al Qahtani, Aramco’s executive vice president of Downstream, said the plans reinforce the group’s long-term commitment to China and belief in the fundamentals of the Chinese petrochemicals sector.

The transaction is said to involve an off-market secondary sale of Rongsheng shares by majority shareholder Zhejiang Rongsheng Holding Group that could offer potential for future collaboration between the parties in trading, refining, chemicals production and technology licensing.

Author: Dede Williams, Freelance Journalist