Saudi Aramco, the world's biggest oil company, has signed a cooperation framework agreement with  Jiangsu Eastern Shenghong Co., Ltd., which could potentially lead the Saudi oil major to become an investor in the Chinese company's refining unit.

The framework agreement will aide "discussions relating to the possible acquisition by Aramco of a 10% strategic equity interest" in Jiangsu Shenghong Petrochemical Industry Group Co., Ltd. or Shenghong Petrochemical, a wholly-owned subsidiary of Eastern Shenghong, Aramco said in a statement on Wednesday.

Beyond being its biggest market for oil, Aramco is looking to China's refineries to crack its crude shipments. Earlier this year, Aramco signed a deal to acquire a 10% in Shenzhen-listed Rongsheng Petrochemical for $3.4 billion.

Aramco' said the potential investment in Shenghong Petrochemicalis subject to due diligence and required regulatory clearances. It didn't disclose the financial terms of the investment.    

The Shenzhen Stock Exchange-listed Eastern Shenghong is a vertically-integrated energy and chemicals enterprise.

Shenghong Petrochemical owns and operates a 320 MBD integrated refinery and petrochemicals complex, a methanol-to-olefins and derivatives complex through its wholly-owned subsidiaries. The facilities are located in the Xuwei Petrochemical Industrial Park in Jiangsu Province.

Under the agreement, Aramco would supply Shenghong Petrochemical with crude oil and potentially other feedstocks. Aramco and Shenghong Petrochemical also intend to cooperate on the development of an expansion project, the statement said.

Mohammed Y. Al Qahtani, Aramco Downstream President: "The signing of this cooperation framework agreement is another significant milestone in Aramco’s Downstream strategy to increase conversion of Arabian crude oil to chemicals and to expand into the critically important Chinese market. We see China as an important partner not only for today but for decades to come.”

(Writing by Brinda Darasha; editing by Seban Scaria)