Saudi Aramco in talks with China's Rongsheng for stake sale in Jubail refinery

The Chinese private refiner could acquire 50%

Saudi Aramco is working towards significant investments in the Chinese petrochemical sector. Reuters
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Saudi Aramco, the world’s largest oil-producing company, is exploring the formation of a joint venture in the Saudi Aramco Jubail Refinery Company with Chinese partner Rongsheng Petrochemical as it seeks to attract new investment to the downstream sector.

The two companies are also working towards significant investments in the Saudi and Chinese petrochemical sectors, Aramco said.

The company recently signed a co-operation framework agreement that envisions Rongsheng’s potential acquisition of a 50 per cent stake in the refinery, according to a statement on Saturday.

Saudi Aramco acquired Royal Dutch Shell's 50 per cent stake in the refinery, also called Sasref, for $631 million in 2019.

The refinery, based in Jubail Industrial City in Saudi Arabia, processes crude oil into petroleum products and has a production capacity of 305,000 barrels per day.

The agreement also lays the groundwork for the development of a liquids-to-chemicals expansion project at the refinery.

Rongsheng is also negotiating a reciprocal deal with Aramco, involving the sale of up to a 50 per cent stake in its unit, Ningbo Zhongjin Petrochemical Co (ZJPC) and participation in its expansion project, according to the statement.

“These discussions highlight our ambition to advance our liquids-to-chemicals strategy with strategic partner Rongsheng, both in Saudi Arabia and China,” Mohammed Al Qahtani, Aramco downstream president, said.

“In building on our existing relationship, we aim to advance our expansion in a key geography and attract new investment to the Saudi downstream sector.”

If the Jubail refinery stake acquisition happens, it would be the first investment by a private Chinese company in a significant Saudi refining asset, according to Reuters.

State refining giant Sinopec is so far the only Chinese company that owns a refinery stake in Saudi Arabia.

Aramco aims to become a global leader in chemicals and the world’s largest integrated energy firm, with plans to expand its refining operations and petrochemical output.

In July 2023, Aramco acquired a 10 per cent interest in Shenzhen-listed Rongsheng through its Netherlands-based subsidiary Aramco Overseas Company for $3.4 billion.

Under the terms of the deal, Aramco agreed to supply 480,000 barrels per day of Arabian crude oil to Rongsheng affiliate Zhejiang Petroleum and Chemical under a long-term sales agreement.

In building on our existing relationship, we aim to advance our expansion in a key geography and attract new investment to the Saudi downstream sector
Mohammed Al Qahtani, Aramco downstream president

Aramco has increasingly looked at refining and petrochemical investments in China, the world's biggest consumer of oil.

Rongsheng owns a 100 per cent equity stake in ZJPC, which operates an aromatics production complex and has an interest in a joint venture that produces purified terephthalic acid, according to the statement.

In 2022, Aramco and the China Petroleum and Chemical Corporation, better known as Sinopec, signed an initial agreement to build a refinery and a petrochemical plant in the world's second-largest economy.

The 320,000-bpd refinery and 1.5 million tonne-per-year petrochemical cracker complex will be operational by the end of 2025.

Last September, Aramco announced plans to become a strategic investor in another private Chinese refiner Jiangsu Shenghong Petrochemical, which operates a 320,000 bpd refinery and petrochemical complex in the eastern province of Jiangsu, Reuters reported.

In 2023, Aramco said that construction of a major integrated refinery and petrochemical complex in China would begin in the second quarter of the year.

The project was announced in 2022 and the Huajin Aramco Petrochemical Company is developing the complex that can process 300,000 bpd of oil and a petrochemical plant capable of producing 1.65 million tonnes of ethylene and two million tonnes of paraxylene a year.

Aramco will supply up to 210,000 bpd of crude oil to the plant, which is being built in China’s Liaoning province. It is expected to be fully operational by 2026.

Saudi Aramco is “doubling down” on China’s energy supply, its chief executive Amin Nasser said last year.

“We want to be an all-inclusive source of energy and chemicals for China’s long-term energy security and … high-quality development.

“That’s why we are doubling down on China’s energy supply, including new lower carbon products, chemicals, and advanced materials, all supported by emissions reduction technologies.”

Earlier this year, Saudi Arabia transferred an 8 per cent stake in Aramco to the kingdom’s sovereign wealth fund, the Public Investment Fund.

After the transfer, the kingdom remains Aramco’s largest shareholder, retaining about 82 per cent in equity.

Updated: April 27, 2024, 1:29 PM