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Saudi Aramco signed on Thursday an agreement with the Zhejiang Free Trade Zone in China to facilitate the acquisition of 9 percent in a local refinery and further expand its downstream presence in the world’s largest oil importer.
The memorandum of understanding (MoU) also includes a long-term crude oil supply agreement and gives Aramco the opportunity to use Zhejiang Petrochemical’s crude oil storage facility to serve Aramco’s customers in Asia.
“These activities reflect the Company’s strategy to expand its presence in the Chinese energy sector,” the Saudi oil giant said in a statement.
Aramco and the Zhejiang Free Trade Zone will also explore potential opportunities to invest in other parts of the value chain, including refining and petrochemical production, storage and trade of crude oil and natural gas, retail, and oil products distribution within the Zhejiang Free Trade Zone.
Earlier this year, Saudi Aramco—which is increasingly looking to lock in future oil demand in Asia’s downstream markets—signed an agreement to buy 9 percent in Zhejiang Petrochemical’s 800,000-bpd integrated refinery and petrochemical complex.
Keeping its crude oil exports subdued in hopes of erasing the glut and propping up oil prices, Saudi Arabia has dramatically reshuffled the priority destinations of its exports, boosting sales in the world’s top oil importer—China—and slashing shipments to the United States.
While Saudi Arabia currently slashes exports to the United States, it is looking East to build a long-term relationship on the prized Asian oil market and to lock in future oil demand in the region expected to show the only solid growth in demand in the coming years and decades.
Earlier this year, Aramco signed a joint venture deal for a US$10-billion fully integrated refining and petrochemical complex in China, which will be predominantly supplied with oil delivered by Saudi Arabia. That’s just one of the deals that Aramco has recently signed in China and India to hold stakes in the downstream sector in Asia bound by long-term crude supply commitments.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.