Saudi Aramco signed on Thursday an agreement to invest in a 400,000-bpd refinery and associated petrochemical plants in eastern China as part of Saudi Arabia’s push to expand its downstream business and secure additional markets for its oil.
The Saudi state oil giant signed a memorandum of understanding with the Zhejiang province to invest in the refinery and petrochemical complex and to cooperate in crude oil supply and trading, Reuters reported, citing details released by the city of Zhoushan, where the complex will be built.
Aramco will take over the 9-percent stake of the Zhoushan government in independent refiner Zhejiang Petrochemical, which is developing the project, Abdulaziz M. Al-Judaimi, Aramco’s senior vice president of Downstream, told the Caixin Global news outlet.
According to Caixin calculations, the value of the stake would be US$308 million (2.14 billion yuan).
Total investment in the refinery-petrochemical project is expected at US$24.9 billion over the next two years, according to Caixin.
Aramco will supply 170,000 bpd of Saudi crude oil to the refinery when it starts operations, Al-Judaimi told Reuters.
Earlier this month, sources at Aramco and Zhejiang Petrochemical told Platts that the independent Chinese refiner had secured term crude supplies from the Saudi oil giant, but declined to specify volumes and loading periods.
The deal with Zhejiang was the second term deal that Aramco had signed with an independent Chinese refiner—the first was with Hengli Petrochemical’s 400,000-bpd refinery in northeast China.
Last year, Saudi Aramco started a charm offensive with local governments in China in a bid to secure participation in the downstream business in one of its largest single crude oil customers.
Aramco will be heavily investing in increasing its refining capacity and chemicals business in pursuit of securing more downstream markets for its crude oil, Aramco’s Al-Judaimi said earlier this year.
Aramco, which produces around 10 million bpd of crude oil, aims to increase its refining capacity from 5 million bpd now to 8 million bpd-10 million bpd, and to double its petrochemicals production by 2030, Al-Judaimi told Reuters in an interview in June.