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Saudi Aramco is negotiating a deal to buy a stake of more than 30 percent in a 260,000-bpd refinery in China owned by state firm PetroChina, in a transaction valued at up to US$2 billion, The Wall Street Journal reported on Friday, quoting people familiar with the talks.
According to one of the people, Saudi Arabia could provide some of the crude oil for the refinery in the Yunnan province, and could also buy some of the retail assets of PetroChina, the WSJ reports.
Aramco and PetroChina have been discussing for years plans for Saudi Arabia to provide crude to a PetroChina refinery in exchange for a stake in the plant, but no deal has been sealed yet.
Back in 2011, Saudi Aramco said it had signed a memorandum of understanding to provide up to 200,000 bpd of Arabian crude oil via a long-term contract to the PetroChina refinery in Yunnan, which was then in the planning stage.
China is a crucial market for Saudi oil, and earlier this year Saudi King Salman visited China in a move widely seen as an attempt to secure future exports, preferably under long-term contracts, which is the standard approach of the Kingdom toward crude oil exports.
Related: The Next Big Catalyst In The U.S. Oil Export Boom
During the king’s visit, China and Saudi Arabia signed preliminary deals that could be worth as much as US$65 billion if finalized. China’s Deputy Foreign Minister Zhang Ming said that President Xi Jinping and King Salman inked a total 14 cooperation agreements, including a memorandum of understanding on 35 projects for “production capacity and investment cooperation”. Among the industries that the agreements cover are oil production, petrochemicals, and even space.
Saudi Arabia is also trying to build more investment ties with China, and according to The Journal, the Saudis hope that Chinese firms and funds would buy major chunks of Aramco’s IPO next year, expected to be the world’s biggest initial public offering ever.
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.