Saudi-Chinese Energy/Petrochems Cooperation Boosted During President Hu’s Visit
A visit to Saudi Arabia by President Hu Jintao of China on 22-23 April presented an opportunity for the two countries to build on the foundations of cooperation in the energy and petrochemicals sectors. On 23 April Saudi Aramco President and CEO ΄Abd Allah Jum΄ah and Sinopec Group President Chen Tong Hai signed a memorandum of understaning (MOU) which, according to an Aramco statement, “re-emphasized their mutual interest in continuing to explore opportunities to expand their long-term business relationship, and to move forward with their joint efforts on a commercial basis.” The MOU focuses on “commercial and technical aspects of the companies’ collaboration in the areas of crude oil treating and commercial storage, natural gas exploration and production, petroleum products and petrochemicals derivatives.” Sinopec is one of three international firms involved in natural gas exploration in the Rubi΄ al-Khali (MEES, 15 March 2004).
The MOU also covers “the two ongoing joint developments in China, the Fujian Refining and Ethylene Project (in which affiliates of Saudi Aramco, Sinopec and ExxonMobil are potential equity partners) and the Qingdao Refinery Project (in which affiliates of Saudi Aramco and Sinopec, along with the local provincial and municipal governments, are potential equity partners). Saudi Aramco and Sinopec agreed to establish the Fujian Ethylene Joint Venture and the Fujian Marketing Joint Venture during 2006, and agreed that the Refining and Ethylene Integrated Project will begin production by early 2009. Regarding the Qingdao Refinery Project, the parties agreed to further their joint efforts to reach agreement on terms for Saudi Aramco’s participation in the Project and to meet the plant’s on-stream date of 2008.” Also the MOU confirms that Saudi Aramco is committed to supplying Sinopec and its affiliates with 1mn b/d of Arabian crude oil by 2010.
In mid-2005, work started on the $3.5bn Fujian refining/ethylene project in Quanzhou. The refinery expansion and upgrade will allow the plant to handle Saudi crude and is due for completion in late 2008 (MEES, 18 July 2005). Meanwhile, the proposed refinery near Qingdao in Shangdong province is expected to involve investment of $1.2bn. Initial suggestions were that Saudi Aramco would supply 200,000 b/d to the plant in return for a 20-40% stake (MEES, 7 March 2005).
SABIC Discusses $5Bn China Venture
On 22 April, President Hu visited the headquarters of Saudi Basic Industries Corporation (SABIC). The company’s Chairman and Chairman of the Royal Commission for Jubail and Yanbu΄, Prince Sa΄ud ibn Thunayan Al Sa΄ud, later told reporters that discussions covered a proposed Saudi-Chinese venture to build a refinery and petrochemical complex in China. Under the proposed venture, SABIC would build the petrochemical complex, while its Chinese partner, Dalian Shide, would build the refinery. The proposed scheme still awaits the approval of the Beijing government.
