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Aramco continues Asian downstream expansion
Aramco has expanded its downstream investment in China as it seeks to further increase its global mid- and downstream footprint to maximise value ahead of the IPO
COMMENTARY
WHAT:
A deal was announced this week to expand
ties with China’s Zhoushan Province, centering on refining and petrochemicals.
WHY:
Aramco has been securing markets for its crude around the world while creating an impressive downstream portfolio.
WHAT NEXT:
The IPO looks set to be split into a local listing followed by a larger overseas sale and
there may yet be more downstream investment announcements between now and then.
SAUDI Aramco cannot be kept out of the news at the moment. With eyes having focused on the changes at the top of the kingdom’s oil hierarchy and the market waiting with baited breath for news about the state firm’s public offering, Ara- mco expanded yet further downstream.
On September 5, the signing was announced of a memorandum of understanding (MoU) with China’s Zhejiang Free Trade Zone.
In making the announcement, the Zhoushan Government was keen to emphasise that it would support and incentivise Aramco’s greater investment in Zhejiang’s “future downstream growth”. The MoU was signed during a visit to Dhahran by Zhejiang governor Yuan Jiajun.
Building bonds
Ties between the Saudi firm and the Chinese province have grown rapidly this year. In Feb- ruary, three MoUs were signed expanding Ara- mco’s presence in the eastern Zhejiang province.
One entails the acquisition of a 9% stake from the Zhousan government in the estimated $25bn Zhejiang Integrated Refining & Petrochemical Complex, under development by Zhejiang Pet- rochemicals Co. (ZPC).
The second was signed with ZPC’s local shareholders – Rongsheng Petrochemical, Juhua Group and Tongkun Group – setting the terms for their collaboration. This includes a long-term
crude supply agreement with the Saudi firm and leave to use ZPC’s crude storage facility to service Aramco’s Asian clients.
The giant project is being developed in two phases. The first comprises a 400,000-barrel per day refinery, a 1.4 million-tonne per year ethane cracker and a 5.2 million-tpy aromatics unit, while the second will double refining capacity and deepen chemical integration. Completion of the first phase is due in 2021.
A third MoU, with state-owned Zhejiang Energy, calls for the joint development of a retail network in the province over the next five years for the sale partly of output from the ZPC complex.
Asian persuasion
Aramco aims to raise global refining capacity to 8-10mn bpd by 2030, with expansion focused on major Asian consumers of the kingdom’s crude. Downstream investment projects in China, India, Indonesia, Malaysia and Pakistan are at various stages of execution, while investments in South Korea have long been established.
Most of Aramco’s current 4.9mn bpd capac- ity is produced through JVs, with around 2-3mn bpd of the total envisaged being converted to petrochemicals, to add to the 17mn tpy of pet- rochemicals already produced.
Aramco’s owned and affiliated refineries absorbed 38% of the company’s crude last year,
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w w w . N E W S B A S E . c o m Week 36 11•September•2019