Saudi Aramco Figures in Design Deal for $3.5bn China Refinery

RIYADH, 27 August 2004 — Saudi Aramco, ExxonMobil and China’s Sinopec yesterday reached agreement on design work for a $3.5 billion expansion of a refinery in China and the addition of a chemical complex.

The companies had agreed to jointly fund “front end loading” design activity, Fujian Petrochemical Co. Ltd. said in a joint statement.

The China Petroleum Chemical Corporation (Sinopec), the Fujian government, along with ExxonMobil China Petroleum and Petrochemical Co. Ltd. and Aramco Overseas Co. BV (Saudi Aramco) jointly own the concern.

The work includes completing initial engineering and design, selecting contractors, finalizing cost estimates and the development of the pre-ordering of long-lead time equipment. The parties will then make a final decision on joint venture formation and project construction.

Fujian Petrochemical will hold a 50 percent stake in the integrated project joint venture if it is formed, with ExxonMobil and Saudi Aramco each holding 25 percent.

The project will result in a “world-class” integrated refining and chemicals complex located at Quangang in southeastern Fujian province.

The move by the Saudi Aramco follows the visit of Minister of Petroleum and Mineral Resources Ali Al-Naimi to China this year, when the two sides discussed how they can participate in the expansion of the refinery. Moreover, the Kingdom is China’s largest crude import source today with volumes reaching 15.18 million metric tons last year. China is also the largest trading partner of Saudi Arabia in the Middle East with two-way trade exceeding $7.3 billion last year. Beijing’s imports from Riyadh alone accounted for $5.2 billion with balance of trade heavily in favor of the Kingdom.

ExxonMobil, Sinopec and Saudi Aramco also agreed to submit a joint feasibility study for a fuels marketing joint venture in Fujian to the Chinese government. The Fujian integrated project will expand the existing refinery in Fujian to 240,000 barrels a day from 80,000 barrels with a significant product upgrading capability, the three companies said in the statement. The upgraded refinery will be designed to refine and process sour Arabian crude oil.

The project, expected to be completed in the first half of 2008, also involves the construction of an 800,000-ton-per-year ethylene steam cracker, polyethylene and polypropylene units and a new 700,000-ton-per-year paraxylene unit. China’s demand for ethylene has been increasing by 10 percent a year in the last few years, with domestic capacity only able to meet 50 percent of demand, according to industry sources. The fuels marketing joint venture plans to manage and operate more than 600 service stations and a network of terminals, pending central government approval of the joint feasibility study and joint venture contract.

The project will result in a world-class integrated refining and chemicals complex located at Quangang, Quanzhou City near Meizhou Bay in Fujian Province. ExxonMobil, Sinopec and Saudi Aramco also agreed to submit a joint feasibility study (JFS) for a fuels marketing joint venture in Fujian Province to the Chinese government.

The FEL activity includes completing initial engineering and design, selecting contractors, finalizing cost estimates and the development of the preordering of long-lead time equipment. At the conclusion of the FEL effort, the parties will make a final decision on joint venture formation and project construction.

The submission of the fuels marketing JFS will mark a significant step in the development of the Fujian integrated ventures. The JFS is a document through which the parties, Sinopec (55 percent), ExxonMobil (22.5 percent) and Saudi Aramco (22.5 percent), will jointly agree upon and define future objectives and plans. The joint venture will market petroleum products produced by the Fujian Integrated Project throughout Fujian province.

The Fujian Marketing Joint Venture plans to manage and operate more than 600 service stations and a network of terminals. The joint venture will be formed upon approval by the Chinese government of the JFS and the joint venture contract, and the completion of all other required contracts, agreements and documentation by the parties.

Together, the Fujian Integrated Project and the Fujian Marketing Joint Venture will be the first fully integrated Sino-foreign project to meet China’s rapidly growing demand for petroleum and petrochemicals. Synergies among these world-class, integrated businesses are aimed to enhance the competitiveness of this project, and provide world-class performance.