Aramco expands investments in China with multi-billion dollar deals

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Saudi Aramco (2222.SE) has increased its investment in China to a multi-billion dollar level. This was achieved by finalizing a planned joint venture in northeast China and acquiring a larger stake in a privately controlled petrochemical group. The company made two separate announcements on Sunday and Monday regarding the deals. As part of these agreements, Aramco will provide the two Chinese companies with a total of 690,000 barrels of crude oil per day. This move will strengthen Aramco’s position as the largest supplier of crude oil to China.

As part of the deal, Aramco will supply 480,000 barrels per day of crude oil to Zhejiang Petrochemical Corp (ZPC), which is controlled by Rongsheng, for a period of 20 years. This agreement follows a preliminary deal that Aramco had signed with the Zhejiang provincial government in 2018, in which it acquired a 9% stake in ZPC.

These deals represent the largest agreements announced since Chinese President Xi Jinping’s visit to Saudi Arabia in December. During the visit, President Xi had called for oil trade to be conducted in yuan, a move aimed at reducing the dominance of the US dollar in global trade. Aramco’s investments in China underscore the growing ties between Riyadh and Beijing, which have raised concerns in Washington, given the historical alliance between the US and Saudi Arabia.Recently, China played a significant role in brokering a deal between Iran and Saudi Arabia to re-establish diplomatic relations. This agreement comes after years of hostility between the two countries, which had contributed to conflicts in the region.

The revelation of Beijing’s secret role in brokering the Iran-Saudi Arabia deal has disrupted the traditional dynamics in the Middle East, where the US had been the primary mediator for decades. Saudi Arabia and other Gulf states, including the United Arab Emirates, have stated that they will not take sides in the growing polarization of global politics. They have instead been seeking to diversify their partners to better serve their national economic and security interests.

The recent deal also sheds light on the intensifying competition between Saudi Arabia and its ally, Russia, in the Chinese crude oil market. As a result of Western sanctions on Moscow following its conflict with Ukraine, Russia has been diverting its oil supplies away from Europe and offering steep discounts to other markets, including China. In fact, in the first two months of this year, Russia surpassed Saudi Arabia as China’s top oil supplier.Aramco has been selling crude oil to the largest refinery in China, an 800,000-bpd plant in the eastern part of the country, under yearly renewed sales agreements. This new deal is expected to solidify Aramco’s position as the leading crude oil supplier to China.

Aramco recently agreement with Chinese partners

In addition to the Rongsheng deal, Aramco recently entered into an agreement with Chinese partners on Sunday to construct an oil refinery and petrochemical project in the northeastern province of Liaoning. The project is expected to begin operations in 2026 to meet China’s increasing demand for fuel and chemicals. The project, located in the city of Panjin, will be Aramco’s second major refining-petrochemical investment in China.The joint venture, called Huajin Aramco Petrochemical Company (HAPCO), will be responsible for constructing and operating the Panjin complex. The facility will include a 300,000 barrels per day oil refinery and a cracker with an annual production capacity of 1.65 million tonnes of ethylene and 2 million tonnes of paraxylene, according to Aramco’s statement. These agreements come after Aramco reported a record profit of $161 billion in 2022, solidifying its position as the world’s top oil exporter.

Saudi Aramco has signed an agreement with Chinese partners to build a refinery and petrochemical complex in Liaoning province to meet China’s growing demand for fuel and chemicals. The project, which is expected to cost $12.2 billion, will include a 300,000 bpd oil refinery and a cracker that will produce 1.65 million tonnes of ethylene and 2 million tonnes of paraxylene annually. Construction is set to begin in Q2 of this year and the plant is expected to be fully operational by 2026. Aramco will supply up to 210,000 bpd of crude oil as feedstock for the plant. Aramco has been expanding its presence in China, with other deals including a joint venture with Shandong Energy and a project in the northeast Chinese province of Liaoning.

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