Saudi Aramco inks $12.2 billion China oil refinery, petchem complex deal

Saudi Aramco signed an agreement with Chinese partners on March 26 for an oil refinery and petrochemical project in northeast China that is expected to start in 2026 to meet the country's growing demand for fuel and chemicals.

The project in Liaoning province's city of Panjin will be Aramco's second major refining-petrochemical investment in China and follows the world's top oil exporter reporting a record profit of $161 billion in 2022, according to Reuters.

Joint venture Huajin Aramco Petrochemical Company (HAPCO) will build and operate the complex that will house a 300,000 barrels per day (bpd) oil refinery and a cracker with an annual production capacity of 1.65 million tonnes of ethylene and 2 million tonnes of paraxylene, state-owned Aramco said in a statement.

The project is expected to cost 83.7 billion yuan ($12.2 billion), partner Panjin Xicheng Industrial Group said in a statement on WeChat on March 26.

Construction at the complex will start in the second quarter after the project secures the required administrative approvals, Aramco said. The plant is expected to be fully operational by 2026, it added.

Aramco will supply up to 210,000 bpd of crude oil as feedstock for the plant.

State-owned NORINCO Group, a Chinese military equipment maker, owns 51% of HAPCO while Aramco and Panjin Xincheng hold stakes of 30% and 19%, respectively.

Separately, Aramco on Sunday signed a memorandum of understanding with the southern Chinese province of Guangdong to explore cooperation in sectors including energy, finance, research and innovations, according to a post on the provincial government's website.

Guangdong, China's largest provincial economy, has drawn global firms like Exxon Mobil and BASF, each building large-scale petrochemical complexes producing high-value chemicals.

Before the pandemic, Aramco signed two other initial agreements for refinery-petrochemical investments in China.

These include one with the Zhejiang provincial government to invest 9% in Zhejiang Petrochemical Corp, which operates China's single largest refinery that can process 800,000 bpd of oil.

The other is with Shandong Energy that includes a potential crude supply agreement and chemical products offtake deal, as well as exploring collaboration on an integrated refining and petrochemical complex in China.

Earlier in March, Saudi Aramco also broke ground on a $7 billion project to produce petrochemicals from crude oil at its South Korean affiliate S-Oil Corp's refining complex in the port city of Ulsan.