Aramco closes further downstream acquisitions in China

Saudi Arabian Oil Co. (Aramco) has struck deals with two Chinese refiners, setting the stage for potential stake acquisitions that would expand the Saudis’ downstream operations in China.

The agreements signed during a visit to the kingdom by a delegation led by Premier Li Qiang include “preliminary documentation for a Development Framework Agreement with Rongsheng Petrochemical Co. Ltd. (Rongsheng) and a Strategic Cooperation Agreement with Hengli Group Co., Ltd.,” Aramco said in a statement.

“The preliminary documentation for the framework development agreement with Rongsheng is related to the potential joint development of the expansion of the Saudi Aramco Jubail Refinery Company (SASREF) facilities,” Aramco said in a statement on its website.

The new agreement between Aramco and Rongsheng is a step forward in a framework agreement they signed in April, under which they plan to establish a joint venture under SASREF. The earlier agreement calls for Rongsheng to potentially acquire a 50% stake in Aramco’s subsidiary and Aramco to potentially acquire a 50% stake in Rongsheng’s subsidiary Ningbo Zhongjin Petrochemical Co. Ltd.

Aramco already owns a 10 percent stake in Rongsheng after finalizing a takeover deal last year that will see Aramco supply 480,000 barrels of crude a day from the Gulf state to what it says is China’s largest integrated refining and chemicals facility.

Rongsheng holds a 51 percent stake in the company that owns the plant, Zhejiang Petroleum and Chemical Co. Ltd. The plant can process up to 800,000 barrels of oil per day and produce up to 4.2 million tons of ethylene per year.

Meanwhile, a second agreement signed during the Chinese delegation’s visit “advances discussions regarding Aramco’s potential acquisition of a 10 percent stake in Hengli Petrochemical Co. Ltd., subject to due diligence and required regulatory approvals,” Aramco said.

“The signing of these agreements confirms our belief in the long-term, mutual benefits that can result from Aramco working closely with our Chinese partners,” said Aramco Downstream CEO Mohammed Y. Al Qahtani. “China is an important country in our global downstream growth strategy, and we look forward to building on a relationship that spans more than three decades to unlock new opportunities in this key market.”

Last year, Aramco also signed agreements securing talks on its bids for stakes in two more Chinese downstream players. Aramco plans to have a 10 percent stake in Shandong Yulong Petrochemical Co. Ltd., as announced on Oct. 11, 2023, and another 10 percent stake in Jiangsu Shenghong Petrochemical Industry Group Co. Ltd., as announced on Sept. 27, 2023.

In another downstream project in China, Aramco and its partners began construction of the Panjin refinery and petrochemical complex in March 2023, Aramco announced on May 9, 2023.

Aramco has the right to deliver up to 210,000 barrels of crude oil per day to the facility, which is owned by Huajin Aramco Petrochemical Co. (HAPCO), in which Aramco has a 30 percent stake. The complex is expected to be fully operational by 2026.

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