Saudi Aramco taking strategic stakes in Chinese petrochemical firms

SINGAPORE (ICIS)–Energy giant Saudi Aramco has been shopping for strategic stakes in Chinese refining and petrochemical projects this year as it aggressively expands its downstream portfolio in the world’s second-biggest economy.

The company signed a memorandum of understanding (MoU) with Shandong Yulong Petrochemical and its owners Nanshan Group, Shandong Energy Group, “to facilitate discussions” on the possible acquisition of a 10% share in the Chinese petrochemical firm, Saudi Aramco said on 11 October.

Aluminum smelter Nanshan Group and coal-mining group Shandong Energy Group have a 51% and 46.1% share, respectively, in Shandong Yulong.

The petrochemical firm “is in the process of completing construction” of its 400,000 bbl/day refinery and petrochemical complex in Shandong province in eastern China, Saudi Aramco said.

Under the MoU, the Saudi energy firm, which is the world’s biggest crude exporter, said it would “potentially supply Shandong Yulong with crude oil and other feedstock”.

The possible deal is subject to due diligence, negotiation of transaction documents and required regulatory clearance, it added.

Saudi Aramco in December last year signed an MoU with Shandong Energy Group to collaborate on an “integrated refining and petrochemical opportunities” in the eastern region.

The project in Longkou, Yantai City is expected to produce 3m tonnes/year of ethylene and 3m tonnes/year of mixed xylenes.

The complex will further produce monoethylene glycol (MEG), polyethylene (PE), polypropylene (PP), ethylene vinyl acetate (EVA) and acrylonitrile butadiene styrene (ABS), among others.

In September, Saudi Aramco had announced that it was interested in taking a 10% stake in China’s Jiangsu Shenghong Petrochemical Industry Group, a wholly owned subsidiary of Eastern Shenghong.

Shenghong Petrochemical owns and operates a 320,000 bbl/day integrated refinery and petrochemicals complex, a methanol-to-olefins and derivatives complex, as well as a purified terephthalic acid (PTA) plant at the Xuwei Petrochemical Industrial Park in Jiangsu province.

These possible acquisitions of strategic stakes followed completion of a $3.4bn stake purchase in Rongsheng Petrochemical in July.

Rongsheng owns a 51% equity interest in ZPC, whose complex has the capacity to process 800,000 bbl/day of crude oil and 4.2m tonnes/year of ethylene.

Focus article by Pearl Bantillo

Thumbnail image: At Qingdao port in Shandong province, eastern China – 11 October 2023. (By Costfoto/NurPhoto/Shutterstock)