Saudi Arabian Oil Co. (Aramco) said on Monday it has agreed to acquire 10 percent of Rongsheng Petrochemical Co. Ltd for $3.6 billion as part of its downstream expansion in China.
The announcement came a day after Aramco said its joint refining and petrochemical complex in Panjin city in Liaoning province will start construction in the second quarter. Expected to cost more than $10 billion, the project includes a refinery that can produce up to 300,000 barrels per day (bpd).
The deal with Rongsheng sees Aramco supply 480,000 bpd of Saudi Arabian oil to what it said is China’s largest integrated refining and chemicals plant.
“Among other assets, Rongsheng owns a 51% stake in ZPC [Zhejiang Petroleum and Chemical Co. Ltd.]which in turn owns and operates China’s largest integrated refining and chemicals complex with a capacity to process 800,000 bpd of crude oil and produce 4.2 million metric tons of ethylene per year,” he said Aramco in a press release.
The mainly state-owned giant will acquire the stake in Rongsheng through wholly-owned subsidiary Aramco Overseas Co., according to the announcement.
“The transaction involves a secondary off-market sale of Rongsheng shares by majority shareholder Zhejiang Rongsheng Holding Group, with potential for future collaboration between the parties in trading, refining, chemical production and technology licensing” , Aramco added.
The transaction is expected to be completed within 2023, subject to regulatory approvals.
“This announcement demonstrates Aramco’s long-term commitment to China and belief in the fundamentals of the Chinese petrochemical sector,” commented Mohammed Y. Al Qahtani, Aramco’s Executive Vice President Downstream. “It is an important acquisition for Aramco in a key market, supporting our growth ambitions and advancing our liquids-to-chemicals strategy.”
Earlier, Aramco said the joint venture Huajin Aramco Petrochemical Co. (HAPCO), in which the Saudi company has 30 percent ownership, will begin construction of the Panjin Integrated Refinery and Petrochemical Complex in June.
“Together, the partnership with Rongsheng and the HAPCO joint venture would see Aramco supply a total of 690,000 bpd of crude-to-high chemical conversion assets,” Aramco said.
Energy future with China
Aramco Chairman and Chief Executive Officer Amin H. Nasser said on Sunday that the company is working on “three main strategies” in China, which he said shares with Aramco a similar vision for the future of the energy industry.
Speaking at the China Development Forum in Beijing, Nasser said the global push for a clean energy transition “desperately needs some realism and clarity.”
“So we welcome the pragmatic thoughts of His Excellency President Xi [Jinping] about this,” he said at the talk show, according to a transcript on Aramco’s website.
Aramco in 2021 committed to “net operating net zero” carbon emissions by 2050, while China, as announced by Xi in 2020, aims for carbon neutrality by 2060.
Nasser said Aramco agrees with Xi “conventional and alternative energy sources will have to work in parallel for decades to come.”
“We also agree that China cannot achieve its climate change mitigation goals at the expense of energy security,” he said.
“In fact, Aramco is already working on three major strategies to support China’s energy and development priorities with these realities in mind,” the Aramco chief added.
“First, expanding our oil production capacity by one million barrels per day to 13 million barrels by 2027 will strengthen China’s long-term energy security. This will increase our gas production by more than a fifty percent by 2030, which should free up an additional million barrels of oil per day for export,” Nasser said.
The second strategy contemplates the reduction of carbon and methane in Aramco’s oil production. The third expands the energy company’s portfolio with low carbon emissions, “especially blue hydrogen and blue ammonia, electric fuels and renewables”.
“And we’re also evaluating entry into liquefied natural gas,” he continued.
Aramco sees “a great win-win opportunity to build an integrated and world-leading downstream sector in China, with particular emphasis on high conversion of liquids directly to chemicals as part of our broader business expansion plans from liquid to chemicals”, Nasser. said
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