Saudi Aramco’s new projects in China underscore massive downstream expansion
SINGAPORE (ICIS)–Saudi Aramco’s new projects in China highlights the energy giant’s ambitions to grow its chemicals business, as it strives to achieve net zero emissions by 2050.
The energy giant, the world’s largest crude oil producer, on 9 December signed a memorandum of understanding (MoU) with China’s Shandong Energy Group to collaborate on an “integrated refining and petrochemical opportunities” in the eastern region.
The MoU with the Chinese state owned coal-mining company includes a potential crude oil supply agreement and chemicals products offtake agreement, Aramco said in a statement.
“The announcement strengthens Aramco’s efforts to support demand for energy, petrochemicals and non-metallics in China as the company seeks to expand its liquids to chemicals capacity to up to 4m barrels per day by 2030,” the company said.
The scope of the MoU extends to cooperation across technologies related to hydrogen, renewables and carbon capture and storage.
Shandong Energy is currently building a refining and petrochemical complex in Yantai called Shandong Yulong Petrochemical – a joint venture project with Chinese conglomerate Nanshan Group.
The first phase of the complex, which is slated for start-up in June 2023, will have a 400,000 bbl/day refining capacity and also be able to produce 3m tonnes/year of ethylene and 3m tonnes/year of mixed xylenes.
The complex is expected to produce downstream chemicals including monoethylene glycol (MEG), polyethylene (PE), polypropylene (PP), ethylene vinyl acetate (EVA) and acrylonitrile butadiene styrene (ABS), among others.
Shandong Energy has a 46.11% share in the project, while Nanshan Group has the bigger stake of 51%.
The projects were signed at the first China-Gulf Cooperation Council (China-GCC) summit in Riyadh on 7-10 December, during which China President Xi Jinping met with his counterparts in the Middle East.
Saudi Aramco also signed a framework agreement with Chinese chemicals major Sinopec to build a Phase II refining and petrochemical complex in Gulei, Fujian province.
The project will have 320,000 bbl/day of refining capacity and 1.5m tonnes/year of ethylene, according to a statement by Sinopec. This facility is expected to come on stream in late 2025.
Aramco currently runs a joint venture petrochemical complex in China with ExxonMobil and Fujian Petrochemical Co via Fujian Refining and Petrochemical Co.
Fujian Petrochemical Co is a 50:50 joint venture between Sinopec and Fujian Petrochemical Industrial Group.
The complex is currently home to a 1.1m tonne/year stream cracker, a 900,000 tonne/year PE unit, a 670,000 tonne/year PP unit as well as an aromatics complex, according to Aramco.
China is the world’s second-biggest economy and its biggest crude importer.
“Aramco is obviously very keen in tapping China’s downstream markets, particularly petrochemicals,” said ICIS senior analyst Jean Zou.
“Also, such partnerships allow Aramco to lock buyers of its crude oil,” she added.
Fuel has been in oversupply for years in China and its focus has shifted to petrochemicals, where growth prospects remain strong as the country has remained heavily reliant on imports for key chemicals like ethylene.
On 10 March this year, Aramco took a final investment decision to participate in the development of a major integrated refinery and petrochemical complex in northeast China.
Huajin Aramco Petrochemical Company (HAPCO), a joint venture between Aramco, North Huajin Chemical Industries Group Corporation and Panjin Xincheng Industrial Group, will develop the liquids-to-chemicals complex.
The greenfield project will include 300,000 bbl/day of refinery capacity as well as petrochemical units which will be built at Panjin, in China’s Liaoning province.
The project will see Aramco supplying up to 210,000 bbl/day of crude oil feedstock to the complex and is expected to be operational in 2024.
Meanwhile, Saudi Aramco is also investing heavily in South Korea via its subsidiary S-Oil.
A $7bn investment in South Korea was announced in November to convert crude oil into petrochemicals at S-Oil’s refining complex in Ulsan.
The project – dubbed Shaheen, meaning “hawk” in Arabic – is planned to have the capacity to produce up to 3.2m tonnes/year of petrochemicals and to include a facility to produce high-value polymers.
Construction of the Shaheen project, which includes a steam cracker to process by-products from crude processing, including naphtha and off-gas, is expected to start in 2023 and be completed by 2026.
Saudi Aramco Amin Nasser in a speech at the 16th Annual Gulf Petrochemicals and Chemicals (GPCA) Forum in Riyadh on 6 December said that petrochemicals could account for more than half of total global oil demand by 2050.
“No matter which energy transition scenario plays out, oil demand from the petrochemicals sector is likely to remain robust,” he said.
“The more intense the transition, the more important petrochemicals will be to the oil and gas industry, and other industries,” Nasser added.
Apart from its external projects, Aramco also announced in November a joint project with SABIC to potentially develop a crude oil-to-chemicals complex at Ras Al-Khair in Saudi Arabia which could convert 400,000 bbl/day of oil into chemicals.
Aramco acquired a 70% stake in chemicals giant SABIC from the Saudi sovereign wealth fund for $69.1bn in 2020.
Aramco has also launched a initial public offering (IPO) for shares in its base oil subsidiary Saudi Aramco Base Oil Co (Luberef) which will raise around Saudi riyal (SR) 4.95bn ($1.3bn).
Luberef operates two production facilities on Saudi Arabia’s west coast at Jeddah and Yanbu, producing around 1.3m tonnes/year of Group I and Group II base oils, according to the ICIS Supply and Demand database.
Focus article by Nurluqman Suratman
Additional reporting by Fanny Zhang
Thumbnail image: Saudi Crown Prince and Prime Minister Mohammed bin Salman, right, greets Chinese President Xi Jinping, during the Gulf Cooperation Council (GCC) Summit, in Riyadh, Saudi Arabia, 9 December 2022. (Source: Untitled/AP/Shutterstock)
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