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Saudi Aramco In Talks To Build Refinery in China

China oil storage facility

Saudi Aramco is negotiating with China National Petroleum Corporation (CNPC) to build a refinery in China, Aramco chairman Khalid al-Falih, who is also Saudi Arabia’s energy minister, said while on a visit to China.

Saudi Arabian Oil Co, or Aramco, hopes to reach a deal to build the Yunnan refinery this year, al-Falih said on Saudi-owned Al Arabiya TV.

Commenting on demand for oil, al-Falih said that the Chinese demand remains “very healthy”.

Al-Falih also said that China had expressed interest in opening its stock markets to Aramco when the oil giant, valued at around US$2 trillion, carries out an initial public offering (IPO) to sell 5 percent of its equity expected to reap much as US$100 billion.

Although Angola’s crude oil exports to China surprisingly topped both Saudi Arabia’s and Russia’s for the month of July, in the first seven months of the year, the Saudis topped the list of China suppliers of crude, with an average daily rate of 1.05 million bpd. This gave the desert kingdom a 14-percent market share in China’s oil market, eking out 0.4 percent more than Russia’s exports to China.

Moreover, giant and established state-controlled Chinese companies such as CNPC may potentially benefit from the recently-announced attempt by Chinese authorities to impose stricter control on taxes paid by independent refineries, the so-called teapots. According to analysts, the clampdown may result in slowed short-term crude import plans by the teapots, although it is unlikely to lead to substantial impacts in the longer run.

Following complaints by established state-owned refinery giants that independents were not paying enough taxes, the Chinese National Development and Reform Commission (NDRC) said last week it could ban companies found to be avoiding taxes from importing crude oil for up to 12 months or in some cases, cancel their licenses to import crude.

The market anticipates that the final result of the tightening of the tax control would depend on how strict China would be with teapots.

By Tsvetana Paraskova For Oilprice.com

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