April 3, 2023 [Reuters] – Saudi Aramco’s new refinery deal to buy a 10% stake in private Chinese chemical group RongshenPetrochemical includes agreements on crude oil storage in eastern China and the supply of plastics and petrochemicals to the Middle East energy giant.
Saudi Aramco (2222.SE) said on Monday it would buy the stake in Rongsheng Petrochemical (002493.SZ), controlling owner of Zhejiang Petrochemical Corp (ZPC) – operator of China’s largest refinery of 800,000 barrels per day (bpd) – and agreed to a 20-year crude supply deal.
Under the Saudi’s first storage agreement in China, ZPC will provide Aramco 3 million cubic metres (about 18.6 million barrels) of storage space in east China port Zhoushan, Rongsheng said in a statement on Tuesday to the Shenzhen Stock Exchange outlining further details of the refinery deal.
Aramco, the world’s top crude oil exporter, has long been scouting for storage space in China to hold crude closer to Asian clients and respond more quickly to the region’s demand.
China, its largest crude oil client, is also likely to import record volumes of oil this year as its economy re-emerges from COVID-19 controls.
Aramco is to maintain a target minimum storage level of 1.5 million tonnes (about 11 million barrels) in Zhoushan and if storage volumes drop below 750,000 tonnes, Aramco will have to restrict its supply to ZPC, according to the stock filing.
Aramco’s only current crude oil storage site in Asia is on Okinawa in Japan, where the state-run firm last December renewed a deal to store about 8 million barrels.
Alongside the 480,000 barrels-per-day crude supply deal announced on Monday, Aramco also agreed to supply Rongsheng – one of China’s largest makers of polyesters – with petrochemical feedstocks such as naphtha and paraxylene. Paraxylene is a raw material for synthetic fibres and plastic bottles.
In return, Rongsheng Petrochemical will supply Aramco 800,000 tonnes a year of plastic raw materials polyethylene and polypropylene, and 300,000 tonnes a year of other chemical products, over the 20-year deal, the statement said.