ARAMCO expands oil supply contracts in China

Published on

October 4, 2018


Article by

Carlos García

The Plan of the Saudi Kingdom Vision 2030 seeks in a horizon of 12 years to achieve a post-oil economy, diversified, less exposed to the vulnerability of the change in oil prices. This plan also seeks to overcome the risks of decarbonisation brought about by a transition based mainly on renewable energies.

While this plan is being advanced, there is still a window of opportunity to boost the economic benefits of having one of the world’s main oil reserves, of almost 300 billion barrels of medium to light quality. For this, it is not enough to go deep down the domestic petrochemical development that already reaches a world leadership, it is also necessary to undertake joint investments with private and public partners willing to build refinery complexes and manufacture of chemical products.

In January 2019 the activities of a gigantic complex of this nature begin in Malaysia where ARAMCO has a great role as investor and supplier of the oil flows that will then be processed and converted into petroleum and petrochemical derivatives.

Undoubtedly, strengthening the Saudi presence in the most dynamic oil market in the world such as Asia is of immeasurable strategic value. The strong rise of the middle class in that area of the world guarantees an increasing demand for final and intermediate products to fit the consumption aspirations of this social layer. For this reason, the penetration of the Chinese market, which represents with its Indian counterpart, those that are moving faster, has also been considered.

In this regard, it is worth highlighting the supply contract established by ARAMCO with Hengli Oilchem, to jointly supply Petrobras with 400,000 barrels per day to the new Hengli Petrochemical refinery on the Chinese island of Changxing in the city of Dalian. The 400,000 bpd unit will be integrated with Hengli’s existing petrochemical operations on the island. This refinery and petrochemical complex is part of the mega industrial structures plan to be developed on the east coast of this country to meet the need for large-scale chemical products. Likewise, the new refineries seek to supplant existing ones that can not satisfy the new environmental requirements.

The 400,000 barrel per day (bpd) refinery in the port city of Dalian, in the northeast of the country, will become one of the five largest refineries in China and a major buyer of Saudi crude oil. The plant is configured to process medium and heavy oil grades from Saudi Arabia as shown in the following diagram.

Hengli is the first independent company to develop a world-class refinery in China. The Hengli complex now has more than 25 processes in operation and is underway for testing in October. This project follows the steps in Hengli of the Zhejiang Petrochemical Co. (ZPC) complex, which aims to open a private refinery in 2020. ARAMCO and Petrobras also hope to sign oil supply agreements of up to 800,000 barrels per day.

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