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Saudi Arabian Oil Co. (Aramco) has signed an agreement to get talks going for the energy giant’s plan to acquire a 10 percent equity stake in Shandong Yulong Petrochemical Co. Ltd.
The memorandum of understanding (MOU) “to facilitate discussions” is the second such deal in weeks that Aramco inked with a downstream company in China, which it sees as a key market in decades to come.
The MOU announced Wednesday proposes that Aramco supply Shandong Yulong with petroleum and other feedstocks.
“Shandong Yulong is currently in the process of completing the construction of a refining and petrochemicals complex that is designed to process around 400,000 barrels per day of crude oil and produce a large volume of petrochemicals and derivatives”, majority state-owned Aramco said in a press release on its website. The project sits in Yantai city in Shandong province.
The proposed acquisition is “subject to due diligence, negotiation of transaction documents and required regulatory clearance”, the announcement stated.
“As one of China’s largest refining and chemical centers, Aramco values Shandong for its current strength and future prospects”, Aramco downstream president Mohammed Y. Al Qahtani said in a statement for the news release.
“We believe this collaboration has potential to enable all parties to contribute to China’s energy security and development, and aid in navigating the energy transition”, Al Qahtani added, touting Aramco’s “long track record as a reliable supplier of energy to China”.
Aramco earlier penned a similar deal concerning its planned purchase of a 10 percent equity interest in a refiner and petrochemicals producer in Jiangsu province. In the so-called cooperation framework agreement with Eastern Shenghong Co. Ltd., Aramco plans ownership in Jiangsu Shenghong Petrochemical Industry Group Co. Ltd. under which the Saudis would supply crude oil and other feedstocks.
“Aramco and Shenghong Petrochemical also intend to cooperate on the development of a large expansion project, subject to further discussions between the parties and the execution of definitive agreements”, Aramco said in a media release September 27.
“The signing of this cooperation framework agreement is another significant milestone in Aramco’s Downstream strategy to increase conversion of Arabian crude oil to chemicals and to expand into the critically important Chinese market”, Al Qahtani said in comments for the September announcement. “We see China as an important partner not only for today but for decades to come”.
Aramco’s downstream expansion in China this year has already seen it buy a 10 percent stake in Rongsheng Petrochemical Co. Ltd. and start the construction of a refining and petrochemical complex through its 30 percent-owned joint venture Huajin Aramco Petrochemical Co. (HAPCO).
Aramco announced July 21 the completion of a 10 percent interest purchase in Rongsheng. “It represents the continued growth of Aramco’s downstream presence in China and includes the supply of 480,000 barrels per day of Arabian crude to the largest Chinese integrated refining and chemicals complex, which is owned by Rongsheng affiliate Zhejiang Petroleum and Chemical Co. Ltd.”, Aramco said announcing the closure of the $3.4 billion (CNY 24.6 billion) acquisition.
In March Aramco and its partners broke ground for a refining and petrochemicals complex in the Chinese city of Panjin, as announced by Aramco May 9. Aramco holds a right to supply up to 210,000 bpd of petroleum feedstock to the facility, owned by HAPCO, a company in which Aramco has 30 percent ownership. Aramco expects the complex to be fully operational by 2026.
Future with China
Aramco president and chief executive Amin H. Nasser told a China forum in March the company is working on “three major strategies” in the country, which he said shares with Aramco a similar vision of the future of the energy industry.
“First, expanding our oil production capacity by a million barrels per day to 13 million barrels by 2027 will strengthen China’s long-term energy security. So will increasing our gas production by more than fifty percent by 2030, which should release an additional million barrels of oil per day for export”, Nasser told the China Development Forum in Beijing on March 26, according to a transcript on Aramco’s website.
The second strategy involves activities that help Aramco curb carbon and methane emissions from its oil production. The third expands Aramco’s portfolio of lower-carbon energy, “especially blue hydrogen and blue ammonia, electrofuels, and renewables”, Nasser said at the gathering. “And we are evaluating entry into liquified natural gas as well”, the Aramco boss added.
To contact the author, email jov.onsat@rigzone.com
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