Leading crude oil exporter Saudi Aramco and China Petroleum and Chemical Corporation (Sinopec) have signed an initial agreement to build a refinery and a petrochemicals plant in China.
The 320,000 barrels-per-day refinery and 1.5 million tonnes-per-year petrochemical cracker complex will be in operation by the end of 2025, Aramco said in a statement on Sunday.
Aramco and Sinopec, along with Saudi Basic Industries Corporation (Sabic), have also signed a preliminary agreement to study the feasibility of developing a petrochemicals complex to be integrated with an existing refinery in Yanbu, Saudi Arabia.
“These projects represent an opportunity to contribute to a modern, efficient and integrated downstream sector in both China and Saudi Arabia,” Mohammed Al Qahtani, Aramco's senior vice president of downstream, said.
“They also underpin our long-term commitment to remain a reliable supplier of energy and chemicals to Asia’s largest economy.”
The petrochemicals industry is expected to be a big driver of crude oil demand in the next few decades as consumers switch to electric vehicles.
Petrochemicals are set to account for more than a third of the growth in oil demand to 2030, and about half to 2050, ahead of the lorry, aviation and shipping sectors, according to the International Energy Agency.
Petrochemicals are also likely to consume an additional 56 billion cubic metres of natural gas by 2030, equivalent to about half of Canada’s total gas consumption today, the agency said.
Aramco aims to increase its liquids-to-chemicals capacity to up to four million barrels per day by 2030.
This month, Aramco signed an initial agreement with China’s Shandong Energy Group to supply crude oil and chemical products.
The scope of the agreement also extends to co-operation across technology related to hydrogen, renewables and carbon capture and storage.
China, the world’s second-largest economy and the biggest crude importer, has been signing long-term agreements with energy exporters amid rising volatility in crude and natural gas prices.
In November, Aramco said it would build a $7 billion refinery-integrated petrochemical steam cracker in South Korea through its S-Oil unit.
Saudi Arabia and China agreed to enhance political, economic and energy ties during Chinese President Xi Jinping's three-day visit to Saudi Arabian capital Riyadh this month.
In September alone, China's exports to Saudi Arabia reached $3.43 billion, while imports stood at $6.81bn.
Last year, crude oil was Saudi Arabia's main export to China, which shipped the most cars to the kingdom.
In 2020, China became the GCC’s top trading partner, and Saudi imports from China rose by 18 per cent in 2020 to $28.1bn, according to Chinese customs data.
Aramco’s net profit surged 39 per cent in the third quarter, driven by higher crude prices and a positive long-term view for increased oil demand.
The state oil company's net profit after zakat for the three-month period to the end of September rose to $42.4bn, from $30.4bn a year ago, it said last month.