SINGAPORE, 26 February 2005 — Saudi Aramco is negotiating with Sinopec Corp. for a stake in a proposed $1.2 billion refinery in eastern China and is eyeing more of such investments, industry officials said yesterday.
The Saudi state oil firm aims to seal the deal by end-2005, an official said, which would make it Aramco’s second investment in China’s protected refining sector and would fit into Riyadh’s plan to boost crude sales to the world’s No.2 energy user.
In return for guaranteeing crude supply to China, Aramco may get a 20-40 percent stake in the 10 million-ton-per-year (200,000 barrel-per-day) plant in Shandong province that is due for start-up in the first half of 2007, industry sources said.
China’s top state oil refiner, Sinopec, and local firms backed by the Shandong provincial government would together hold a controlling stake in the project. The provincial government is the driving force behind the plan in its efforts to stimulate the region’s agriculture-intensive economy.
Formal discussions kicked off late last year after Sinopec set up a project team in the city of Qingdao, sources said.
“We are evaluating the commercial viability (of Qingdao). This will be part of a long-term partnership with Sinopec. We want to get involved in other projects as well,” an Aramco official told Reuters.
Saudi Arabia, the biggest seller of crude oil to China but faces increasing competition from other Middle Eastern producers such as Oman and Iran, was most likely to be the exclusive supplier of crude to the Qingdao refinery, industry sources said.
The investment would also bolster Aramco’s presence in Asia where it has stakes in refineries in Japan, South Korea and the Philippines.
India’s state-owned refiners are also courting Middle East producers including Saudi Arabia, the world’s top oil producer, to secure long-term oil supply.