Saudi Aramco in Deal with Chinese Partners to Build Refinery

(Bloomberg) — Saudi Aramco., the world’s biggest energy company, has signed agreements with Chinese partners to build a state-of-the-art refining complex in the northeast region of the Asian nation.

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Aramco agreed to the deal with North Huajin Chemical and Panjin Xincheng to start construction on the refinery and petrochemical complex in Liaoning Province, Amin Nasser, the Saudi company’s president and chief executive officer, said at the China Development Forum in Beijing on Sunday.

“We see a major win-win opportunity to build a world-leading, integrated downstream sector in China, with special emphasis on the high conversion of liquids directly into chemicals as part of our broader liquid-to-chemicals business expansion plans,” Nasser said.

Aramco wants to be an all-inclusive source of energy and chemicals for China’s long-term energy security and China’s high-quality development, he said.

An initial framework agreement for the Liaoning refinery was first signed during Saudi Arabian King Salman bin Abdulaziz’s visit to Beijing in March 2017.

In a separate statement, Aramco said construction is due to start in the second quarter and it expects the project to be fully operational by 2026. Aramco will own 30%, Norinco Group 51% through its subsidiary North Huajin Chemical, and Panjin Xincheng 19% of the joint venture.

The refining complex will include 300,000 barrels-a-day refinery and 1.65 million tons steam cracker and Aramco will supply up to 210,000 barrels per day of crude oil feedstock to the project.

In 2019, Aramco agreed to set up a venture with two Chinese partners when Crown Prince Mohammed bin Salman was in Beijing in what was seen as a landmark deal with a key ally. However, the Saudis briefly paused investment in the refinery venture in 2020 amid an uncertain market outlook when Covid lockdowns in China throttled downstream demand.

After reviving talks of investments in early 2022, Aramco said last March that it would go ahead and invest in a 300,000 barrel-a-day refinery with ethylene cracker with China North Group Corp., known as Norinco, the parent company of North Huajin Chemica and a Pajin-based company.

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Aramco is expanding oil production capacity by a million barrels per day to 13 million barrels by 2027 and will increase gas production by more than 50% by 2030, which would add an extra one million barrels a day of oil for export, Nasser said.

The Saudi company is also partnering with Baoshan Iron & Steel Co. to produce steel plates in Saudi Arabia with a lower carbon footprint, he said. The company also signed a letter of intent to be part of a new entity being created by Renault SA and Zhejiang Geely Holding Group Co. amid efforts to develop more efficient and lower-emission engines and hybrid systems, he said.

–With assistance from Serene Cheong and Dana Khraiche.

(Updates with timeline of operations, JV ownership in 6th paragraph.)