Saudi Aramco has strengthened its presence in the refining and petrochemical sector in China through a huge acquisition deal.
Aramco (one of the world’s leading integrated companies in the field of energy and petrochemicals) has signed definitive agreements to acquire a 10% stake in Rongsheng Petrochemical Company Limited, which is listed on the Shenzhen Stock Exchange (Rongsheng) for 24.6 billion Chinese yuan ($3.6 billion at current exchange rates).
The new deal will significantly expand Saudi Aramco’s presence in refining, petrochemicals, and marketing in China, according to data seen by the specialized energy platform.
New deal details
Through the strategic partnership, Aramco will supply 480,000 barrels per day of Arab crude oil to Rongsheng’s Zhejiang Oil and Petrochemical Company (Zhejiang), under a long-term sales agreement.
Aramco Overseas Company, a wholly owned subsidiary of Saudi Aramco, will acquire the stake in Rongsheng.
Among other assets, Rongsheng acquires a 51% stake in Zhejiang Corporation, which in turn owns and operates the largest integrated refining and petrochemical complex in China with a processing capacity of 800,000 barrels per day of crude oil and an annual production of 4.2 million metric tons of ethylene.
For his part, Mohammed Yahya Al-Qahtani, Executive Vice President of Refining, Chemicals and Marketing at Saudi Aramco, said: “The announcement confirms Aramco’s long-term commitment to China and its belief in the strength of the Chinese petrochemical sector.”
He stressed the importance of the acquisition for the company in a key market that enhances its ambitions for growth and moving forward towards the liquids-to-chemicals strategy.
He pointed to the deal’s contribution to securing reliable supplies of crude oil to one of the most important refineries in China.
Strategic partnership
“The strategic cooperation will take our long-term friendship and mutual trust to a new level, and pave the way for a bright future with high-level development of the world’s petrochemical industry,” says Li Shuirong, Chairman of the Board of Directors of Rongsheng Group.
He expected that Saudi Aramco’s participation would greatly help Rongsheng implement the Chinese company’s petrochemical growth strategy.
The investment strengthens the important relationship between Aramco, Rongsheng and Zhejiang, which operates one of the world’s most advanced chemical conversion assets.
The transaction includes a secondary off-exchange sale of Rongsheng shares by the majority shareholder, Zhejiang Rongsheng Holdings Group, with the potential for future cooperation between the parties in business activities, refining, chemical production and technology licensing.
The transaction is expected to close by the end of 2023, subject to regulatory approvals.
petrochemicals in China
The new deal comes in the wake of Saudi Aramco’s announcement, yesterday, Sunday, March 26, of the start of implementation of the “Aramco Huajin” project, which includes a huge integrated refinery and a petrochemical complex in northeastern China, in the second quarter of 2023.
Aramco, which owns 30% of Aramco Huajin, will supply up to 210,000 barrels per day of crude oil feedstock to the complex.
Through the partnership with Rongsheng and the Aramco Huajin joint venture, Saudi Aramco will supply a total of 690,000 barrels per day of crude oil to higher chemical conversion facilities.
The project in Panjin, Liaoning Province, will be Aramco’s second largest refining and petrochemical investment in China, and comes after the world’s largest oil exporter reported record profits of $161 billion in 2022.
Huajin Aramco Petrochemical Company will build and operate the complex, which will include an oil refinery with a processing capacity of 300,000 barrels per day and a cracker with an annual production capacity of 1.65 million tons of ethylene and 2 million tons of paraxylene.
The project is expected to cost 83.7 billion yuan ($12.2 billion), the Chinese company said in a statement on Sunday.
Sinopec is heading to Saudi Arabia
For its part, Sinopec, the largest oil refining company in Asia, announced that it will actively explore opportunities in Saudi Arabia; China’s state oil and gas company already owns a stake in the YASREF refinery.
During a press conference, Sinopec Chairman Ma Yongsheng did not reveal the details of his company’s plans to expand into the Saudi market, after the company announced a 6.9% decline in net profits for the past year (2022).
Sinopec said its net profit last year was 66.3 billion yuan ($9.65 billion), based on Chinese accounting standards, compared to 71.21 billion yuan in 2021, but it was still the third highest in a decade thanks to higher oil and gas prices.
In 2023, the Chinese company plans to produce 280.23 million barrels of crude oil and 1,292 billion cubic feet of natural gas, compared to 280.86 million barrels of crude oil and 1,248 billion cubic feet of gas in 2022, respectively.
It expected Sinopec’s crude production to reach 250 million tons, or about 5 million barrels per day, an increase of 3.3% over 2022.
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