Saudi Aramco to push ahead China venture, supply 1 mln bpd crude by 2010

World's largest oil producer Saudi Aramco unveiled its China investment program when Chinese President Hu Jintao was in Saudi Arabia for a state visit.

On April 23 the company announced a memorandum of understanding was signed in Riyadh last Saturday between Aramco and China Petroleum and Chemical Corporation (Sinopec), China's largest petroleum products producer and supplier.

Aramco said the two sides agreed in the MOU on the establishment of two joint ventures for an ethylene plant and marketing efforts in Fujian in 2006, as well as the operation of the joint project of the integrated refining and ethylene production by 2009.

The two sides pledged further cooperation on the refining plant in Qingdao and promised to reach consensus on Aramco's participation in the project to make sure that the plant would be operational by 2008 as scheduled.

Aramco, which turns out 8 million barrels of oil per day, or one-tenth of the world's total, has promised a daily supply of 1 million barrels of crude oil to Sinopec by 2010.

Saudi Arabia is the largest oil exporter to China. 17 percent of China's oil imports is from Saudi Arabia. Its oil exports to China increased to some 500,000 barrels a day this year from 440, 000 barrels last years.

Market insiders believe the team-up of the two sides lead to a win-win situation. For Sinopec, 70 percent of its crude imports will come from Saudi Arabia if its contracts with Aramco are carried out. Now oil from Saudi accounts for 55 to 60 percent of Sinopec's crude imports.

Talks about the above two projects in Fujian and Qingdao were said to have begun 10 years ago. The launch of the Fujian project means a new chapter in Aramco's march into China.

The agreement between Aramco, Sinopec and Exxon-Mobil at the end of August, 2004, brought forth a processed oil marketing joint venture in Fujian in which Sinopec held 55 percent while Aramco and Exxon-Mobil had 22.5 percent respectively. Besides, Aramco was entitled access to at least 600 filling stations in China.

In the Fujian-based refining-ethylene compound which was put into operation on July 8, 2005 with the oil processing capacity of 10 million annually, Sinopec takes 50 percent of the stakes while Aramco and Exxon-Mobil share half-and-half of the other 50 percent.

Although the Aramco's equity in the Qingdao refinery is not specified in the MOU, the intention of cooperation is clear. The Qingao plant which was incorporated in November last year was an alliance of three companies with 85 percent stakes from Sinopec, 15 percent from Shangdong International Trust and Investment Corporation, and 5 percent from Qingdao International Trust and Investment Corporation.

Sinopec has also jointed hands with Aramco on seeking opportunities in the upstream industry in Saudi Arabia. In March, 2004, Sinopec, together with its Saudi partner, made a successful bid for the gas exploration rights in the Rub Alkhali Basin in Saudi Arabia. In the joint venture to run the operation, Sinopec controls 80 percent while Aramco holds the remaining minority of 20 percent.

By People's Daily Online