In what has been dubbed a “HUGE push” by the Saudi state-owned petrochemical giant into China’s economy, Saudi Aramco surprised the world with a double-header of pro-China news: first, Aramco said it will build a $10 billion refinery in China and, just hours later, it revealed that it would acquire a stake a 10% stake in a Top Chinese oil refinery.
Through the strategic arrangement, Aramco would supply 480,000 bpd of Arabian crude oil to Rongsheng affiliate Zhejiang Petroleum and Chemical Co. Ltd (ZPC), under a long-term sales agreement. #OOTT #China
— Amena Bakr (@Amena__Bakr) March 27, 2023
The news come as Saudi Arabia is on the verge of dethroning the petrodollar and accepting payment in Yuan for Chinese oil sales.
Let’s dig deeper.
Over the weekend, Saudi Aramco – world’s biggest oil producer – announced plans to build a $10-billion refining and petrochemical complex in China’s northeast over the next three years, accelerating a development that was paused during the pandemic, and taking advantage of the country’s growing demand for energy. According to the Aramco news release, the complex will have a capacity of 300,000 barrels of crude daily, and OilPrice adds that the Saudi major will supply 201,000 barrels per day to the facility.
The project will be carried out in partnership between Aramco and two Chinese companies. Construction works should begin in the second half of this year, with the project scheduled for completion in 2026.
“This important project will support China’s growing demand across fuel and chemical products. It also represents a major milestone in our ongoing downstream expansion strategy in China and the wider region, which is an increasingly significant driver of global petrochemical demand,” said Aramco’s head of downstream, Mohammed Al Qahtani.
The news follows a report from December last year according to which Aramco had struck a deal with China’s Sinopec to build a 320,000-bpd refinery and petrochemical cracker in China, highlighting the latter’s major role in global oil consumption yet again.
Then, one day later, Aramco also unveiled that it has agreed to buy a 10% stake in a giant oil complex in China for 24.6 billion yuan ($3.6 billion), in exchange for securing sales to one of the country’s largest refineries.
Aramco will also supply 480,000 barrels of crude oil per day to Rongsheng Petrochemical Co’s refinery in the eastern province of Zhejiang over a 20-year period, according to a statement from the Chinese company. Aramco will also provide a credit of $800 million to Rongsheng for the purchase, that statement said.
Refining and petrochemical investments have been a priority for Aramco as it seeks to secure long-term demand for its main product, even as it expands local refining capacity as well. According to the International Energy Agency and other forecasters, a bet on petrochemicals is a good long-term bet in the oil industry amid expectations of a decline in oil demand for transport fuels. The IEA has projected that petrochemicals will account for more than a third in oil demand growth by 2030, rising to 50% of demand by 2050 as transport electrifies.