Saudi Aramco will partner with Norinco, and Panjin Sincen to form a company called Huajin Aramco Petrochemical Company.
Sunday 24, February 2019
(Bloomberg) --Saudi Aramco has agreed set up a joint venture with two Chinese firms to build a $10 billion refining and petrochemical complex, reaffirming its commitment to boost investments in the world’s biggest oil importer.
Saudi Aramco will take a 35 per cent stake in the new company, while Norinco and Panjin Sincen will hold 36 per cent and 29 per cent, respectively. Aramco also plans to establish a fuels retail business in China, according to the statement. By the end of 2019, a “three-party Marketing JV Company” is expected to be formed between Saudi Aramco, North Huajin and Liaoning Transportation Construction Investment Group Companyto develop a retail fuel stations network in the target markets, it said.
The project will include a 300,000 barrels a day refinery, an ethylene cracker and a paraxylene unit. Aramco will supply up to 70 per cent of the crude feedstock for the complex, which is expected to start operations in 2024.
The deal, signed while Crown Prince Mohammed bin Salman is in Beijing, is part of a strategy to secure demand for Saudi crude by investing in energy assets across the biggest oil-consuming region. Prince Mohammed is on an Asia-wide trip that has already seen him pledge billions of dollars for projects in India and Pakistan. Other investments agreed recently include stakes in South Korea’s Hyundai Oilbank Company and a petrochemical complex in Malaysia.
Saudi Arabia is battling for global market share amid challenges posed by US shale oil producers, Russia and fellow members of the organisation of Petroleum Exporting Countries. The world’s biggest crude exporter has been topped by Russia in oil sales to China while competing with incremental suppliers such as the US. The competition has further intensified after OPEC committed to end a global glut, with the Saudis bearing the brunt of the supply curbs.
“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.
An initial framework agreement for the Liaoning refinery was first signed during Saudi Arabian King Salman bin Abdulaziz’s visit to Beijing in March 2017. Aramco had announced that it would build a 300,000 barrels-a-day refinery with a one million tonnes-a-year ethylene cracker with Norinco.
Aramco’s looking beyond China as well. It announced plans to take a 20 per cent stake in South Korean oil refiner Hyundai Oilbank. It’s also helping finance a $27 billion petrochemical complex in Malaysia and has signed an MoU with Pakistan to build a refinery. The firm also expressed interest in investing in India’s petrochemical manufacturing assets.