Saudi Aramco raised its multi-billion-dollar investment in China by finalising and upgrading a planned joint venture in northeast China and acquiring an expanded stake in a privately controlled petrochemical group.
The two deals, announced separately on Sunday and Monday, will see Aramco supplying the two Chinese companies with a combined 690,000 barrels a day of crude oil, bolstering its rank as China’s top provider of the commodity. Aramco said on Monday it had agreed to acquire a 10% stake in privately controlled Rongsheng Petrochemical Co Ltd for about $3.6 billion.
The deal includes the supply of 480,000 bpd of crude oil to Rongsheng-controlled Zhejiang Petrochemical Corp (ZPC) for 20 years, Aramco added. It follows a preliminary agreement Aramco reached with the Zhejiang provincial government in 2018 for a 9% stake in ZPC.
The deals are the biggest to be announced since Chinese President Xi Jinping visited the kingdom in December where he called for oil trade in yuan, a move that would weaken the U.S. dollar’s dominance in global trade.
Aramco’s investments highlight Riyadh’s deepening ties with Beijing which have raised security concerns in Washington, Riyadh’s traditional ally. In a deal brokered by China, Iran and Saudi Arabia agreed to re-establish relations earlier this month after years of hostility that had fueled conflicts across the region.
Beijing’s secret role in the breakthrough shook up dynamics in the Middle East, where the United States was for decades the main dealmaker. The Rongsheng deal comes on the heels of Aramco’s agreement with Chinese partners on Sunday for an oil refinery and petrochemical project in the northeast Chinese province of Liaoning.
The Liaoning project, expected to start in 2026, 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.
Published in The Express Tribune, March 28th, 2023.
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