Aramco, Sinopec in MOU for $10 Billion Yanbu Refinery
State-run Saudi Aramco signed an initial deal with China’s Sinopec Group to jointly build a $10-billion Yanbu refinery on the Red Sea coast, a pact that further cements ties between the two energy giants.
China, the world’s No. 2 oil user, is surpassing the United States as Riyadh’s largest crude oil buyer with volumes poised to touch an average of 1 million barrels per day this year, or roughly one-fifth of China’s total crude imports.
Aramco, the world’s top crude oil exporter, said late on Wednesday it would hold a 62.5-percent stake in the Red Sea Refining Co formed to develop the 400,000 barrels per day refinery in Yanbu, while Sinopec would own the remainder.
The venture would be the first refining project the Chinese state oil major, parent of top Asian refiner Sinopec Corp <0386.HK>, builds outside China, putting it in a race against rival PetroChina <0857.HK>, which has snatched a string of refinery deals beyond Chinese borders.
“This opens a new page of investment for Sinopec in Saudi’s refining and petrochemical sector, enhancing a strategic relationship that complements each other’s strength,” Su Shulin, general manager of Sinopec Group was quoted as saying in a Sinopec statement.
“The project will boost Sinopec’s global competitive edge and expand the firm’s supply channel for international resources.”
The refinery was to have been built by U.S. oil firm ConocoPhillips and Aramco. But Conoco pulled out of the plans in April 2010 as it shifted away from the refining business to focus on oil and gas explorations.
The Yanbu plant, expected to start operations in 2014, accounts for just under a quarter of Saudi plans to add around 1.7 million bpd of refining capacity to the current 2.1 million bpd.
Aramco has said it will push on with the project even after ConocoPhillips withdrew and in July awarded deals to build the refinery.
The refinery is slated to process heavy crude from Saudi Arabia’s project to pump 900,000 barrels per day from the Manifa oilfield.
It is a sister project to another 400,000-bpd refinery Aramco is building with France’s Total at Jubail on Saudi Arabia’s Gulf coast.
Aramco has already partnered with Sinopec at the joint venture Fujian plant in southeast China.
Sinopec signed on Wednesday a joint venture deal with state-run Kuwait Petroleum Corp (KPC) worth around $9 billion to build an oil refinery and petrochemical plant in southern China.
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