Aramco Completes $3.4B Stake Buy from China's Rongsheng - Rigzone News

Aramco Completes $3.4B Stake Buy from China's Rongsheng | Rigzone

Aramco Completes $3.4B Stake Buy from China's Rongsheng

Saudi Arabian Oil Co. (Aramco) has concluded its purchase of a 10 percent interest in Rongsheng Petrochemical Co. Ltd. for $3.4 billion (CNY24.6 billion) as part of its downstream swoop in China.

The deal, announced March 27, sees Aramco supplying 480,000 barrels per day (bpd) of petroleum from Saudi to what it said is China’s biggest integrated refining and chemicals plant.

Rongsheng holds a 51 percent interest in the owner of the plant, Zhejiang Petroleum and Chemical Co. Ltd. The plant can process up to 800,000 bpd of crude and produce up to 4.2 million metric tons of ethylene a year, according to the Saudi majority state-owned giant.

“Our strategic partnership with Rongsheng advances Aramco’s liquids to chemicals strategy while growing our presence in China and showcases our importance as a reliable supplier of crude oil”, Aramco downstream president Mohammed Y Al Qahtani said in a press release Friday. “This key acquisition is an important part of Aramco’s long-term growth strategy, expanding our presence in a vital market.”

Aramco also has a joint project to build a refining and petrochemical complex in the northeastern Chinese city of Panjin. It is planned to produce up to 300,000 bpd.

Rongsheng chair Li Shuirong said in a statement about the purchase, “The completion of this transaction marks the entry of Rongsheng and Aramco into a new era together, and also signifies an important step forward in Rongsheng's internationalization strategy”.

Aramco has acquired the interest in Rongsheng through wholly-owned subsidiary Aramco Overseas Co.

“The transaction involves an off-market secondary sale of Rongsheng shares by majority shareholder Zhejiang Rongsheng Holding Group, with potential for future collaboration between the parties in trading, refining, chemicals production and technology licensing”, Aramco said March announcing the purchase.

In another downstream project in China, Aramco and its partners broke ground March for the Panjin refining and petrochemicals complex, as announced by Aramco May 9.

Aramco holds a right to supply up to 210,000 bpd of crude oil feedstock to the facility, owned by Huajin Aramco Petrochemical Co. (HAPCO), where Aramco has 30 percent ownership. The complex is expected to be fully operational by 2026.

“Combined, the partnership with Rongsheng and the HAPCO joint venture would see Aramco supply a total of 690,000 bpd of crude to high chemical conversion assets”, Aramco said in the March announcement.

Saudi Energy Future with China

Aramco is working on “three major strategies” in the world’s second-biggest economy, which shares with the company a similar vision of the future of the energy industry, Aramco president and chief executive Amin H Nasser had said.

Speaking at the China Development Forum March 26 in Beijing, Nasser said the transition to clean energy “desperately needs some realism and clarity”.

Aramco announced October 23, 2021 it has set a goal of "operational net-zero emissions” by 2050. China is aiming for carbon neutrality before 2060, according to the country’s climate pledge deposited to the United Nations October 28, 2021 under the so-called Nationally Determined Contributions (NDC). Meanwhile Saudi’s updated NDC, submitted June 2, 2022, shows a target to cut greenhouse gas emissions by 278 million tons of carbon dioxide equivalent annually by 2030 relative to the 2019 level. The kingdom emitted 577.44 metric tons 2019 according to the Emissions Database for Global Atmospheric Research released September 2022.

Nasser said Aramco agrees with Chinese President Xi Jinping “conventional energy sources and alternatives will have to work in parallel for decades to come”.

“We also agree that China cannot achieve its climate change mitigation goals at the expense of energy security”, he said.

“In fact, Aramco is already working on three major strategies to support China’s energy and development priorities with these realities in mind”, the Aramco boss added.

“First, expanding our oil production capacity by a million barrels per day to 13 million barrels by 2027 will strengthen China’s long-term energy security. So will increasing our gas production by more than fifty percent by 2030, which should release an additional million barrels of oil per day for export”, Nasser said.

The second strategy targets carbon and methane reduction in Aramco’s oil production. The third expands the company’s portfolio of lower-carbon energy, “especially blue hydrogen and blue ammonia, electrofuels, and renewables”.

“And we are evaluating entry into liquified natural gas as well”, Nasser said.

Aramco sees “a major win-win opportunity to build a world-leading, integrated downstream sector in China, with special emphasis on the high conversion of liquids directly into chemicals as part of our broader liquid-to-chemicals business expansion plans”, he said.

To contact the author, email jov.onsat@rigzone.com

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