Saudi Aramco Set for Chinese Energy Deals
State-owned oil group eyes refinery pacts with China’s CNPC and Sinopec
RIYADH—Saudi Arabian Oil Co. is in advanced talks with two of China’s leading energy companies over a number of energy projects to help increase the Saudi state-owned oil group’s sales in Asia.
The talks, which are at an advanced stage, include projects with China National Petroleum Corp. and Sinopec and involve refineries in the city of Qingdao and in the provinces of Yunnan and Sichuan, according to Saudi Aramco Chairman Khalid al-Falih.
“We are hoping for other projects with Sinopec, especially in China.,” Mr. al-Falih said on Wednesday. “We are hoping that Aramco will expand its investments in the refining, marketing and petrochemicals sectors,” he said.
Mr. al-Falih comments follow Tuesday's visit by Chinese President Xi Jinping to Riyadh against a backdrop of evolving Chinese ties with the region. After Saudi Arabia, Mr. Xi starts a two-day stay in Egypt on Wednesday night before heading to Iran.
Saudi Arabia, the world’s leading oil-producing country, remains a steady supplier to China, but today, Chinese oil imports are growing faster from Russia, Iraq and other producers.
Imports of Saudi Arabian crude by China rose just 2% in the first 11 months last year, compared with overall Chinese import growth of about 9%, according to customs data. Imports from Russia—China’s No. 2 supplier after Saudi Arabia—meanwhile jumped nearly 30%.
Low oil prices have rocked the Saudi economy, prompting the kingdom to cut popular subsidies for gasoline and other energy products. Its longtime alliance with the U.S. has been challenged by the American-led deal to lift sanctions on Iran which is increasing its own oil exports. Iran made a move on Tuesday to claw back market share it lost in Europe during sanctions, cutting crude prices to much of the continent following similar moves by Saudi Arabia this month.
Saudi Arabia has sought to tighten ties to Chinese customers through the building of refineries in tandem with Chinese companies. Aramco has been in yearslong talks with CNPC about building a 260,000-barrels-a-day refinery in Yunnan province, but little progress has been made. Aramco is also in talks to acquire a stake in a CNPC refinery as well as retail assets, people familiar with the matter have said.
Oil prices slid on Wednesday, with U.S. oil futures falling to their lowest level since 2003, dragged down by a slide in global financial markets and continued concerns about the glut of crude.
Fears about an economic slowdown in China, the world’s second biggest economy, have rattled financial markets at the start of the year and added to the bearish sentiment on the oil market.