Saudi Aramco seeks more JV's inChina

By Eric Watkins
Saudi Aramco president and chief executive officer Khalid Al-Falih said his firm is seeking additional opportunities to invest in China to expand on its joint ventures and strengthen relations with the world’s biggest energy consumer.

“We continue to pursue prospects for other future investments in China,” said Al-Falih in a speech following his firm’s agreement last week to jointly develop two refineries together with Chinese partners.

“The model of integrated investments which extend across the value chain has proven to be a success in our Fujian joint venture,” said Al-Falih, adding that “Saudi Aramco is looking to replicate the right ingredients for similar profitable JV opportunities in China.”

Production began 18 months ago at the Fujian Integrated Refining and Ethylene Joint Venture Project, whose partners include Fujian Petrochemical Co Ltd, 50%, ExxonMobil China Petroleum and Petrochemical Co Ltd 25% and Saudi Aramco Sino Co Ltd, 25%, (OGJ Online, Nov. 11, 2009).

Aramco Overseas Co. BV and PetroChina Co. Ltd. signed a memorandum of understanding for joint development of a 200,000-b/d grassroots refinery in Yunnan Province, which will process Arabian crude oil supplied by Aramco, and yield products including ultralow-sulfur gasoline and diesel meeting Chinese specifications (OGJ, Mar. 23, 2010).

In addition, Saudi Aramco and China Petrochemical Corp (Sinopec) signed a Memorandum of Understanding related to the ongoing development of the Red Sea Refining Co (RSRC), a world-class, full-conversion refinery at Yanbu, on the west coast of Saudi Arabia.

Saudi Aramco and Sinopec have agreed to initially subscribe to equity interests of 62.5% (Saudi Aramco) and 37.5% (Sinopec) in RSRC should they proceed to formally participate in a joint venture.

Al-Falih told listeners that oil satisfies nearly 20% of China’s energy needs, and accounts for virtually all the energy used in transportation and petrochemicals.

“Therefore, oil will remain a significant part of China’s energy mix,” said Al-Falih, who cited China’s National Development and Reform Council that the country’s oil demand will approach 12 million b/d by the end of 2020, up 33% from the current 9 million b/d.

Al-Falih took exception to analysts who like to single out the impact of China’s demand on world oil markets, saying that “increased Chinese demand offsets declining consumption in the OECD nations.”

More to the point, he said that increased Chinese demand “is essential to encouraging necessary investment in exploration as well as oil production, refining and transportation capacity, which ultimately benefits all petroleum consumers.”

“Our relationship is founded on the provision of steadily growing volumes of crude oil—currently about 1 million b/d, making Saudi Aramco China’s largest and most reliable supplier,” said Al-Falih.

In a passing reference to current problems in North Africa, Al-Falih noted that Saudi Arabia “has been and will continue to be a calming influence in global oil markets—particularly in times of market turbulence, when it can tap its substantial spare capacity to make up supply shortfalls elsewhere.”

“Since I come to you from Saudi Arabia, an island of calm amid the turmoil sweeping the Middle East and North Africa, I can tell you that much of that turbulence is grounded in economic factors and a lack of opportunity, especially among young people,” Al-Falih said.

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