Saudi Aramco set to invest in refinery-petrochemical project in east China

State oil giant Saudi Aramco signed an agreement on Thursday to invest in a refinery-petrochemical project in eastern China, part of its strategy to expand in downstream operations globally.

The memorandum of understanding between the company and Zhejiang province included plans to invest in a new refinery and co-operate in crude oil supply, storage and trading, according to details released by the Zhoushan government after a signing ceremony in the city south of Shanghai.

Zhejiang Petrochemical, 51 per cent owned by textile giant Zhejiang Rongsheng Holding Group, is building a 400,000-barrels-per-day refinery and associated petrochemical facilities that were expected to start operations by the end of this year.

This is the third such project in China that Saudi Aramco has set its sight on as it seeks to lock in long-term outlets for its crude oil and produce fuel and petrochemicals to meet rising demand in Asia and cushion the risk of a slowdown in oil consumption.

Last month, Saudi Aramco signed a long-term deal with the Zhejiang project's operator Zhejiang Rongsheng to supply crude oil.

The oil giant had not yet finalised the size of its stake in the project and still needed to complete due diligence, Aramco's Senior Vice President of Downstream, Abdulaziz al-Judaimi, told Reuters on the sidelines of the event.

Saudi Aramco expects to supply 170,000 barrels per day of Saudi crude to the refinery in Zhoushan when it starts operations, he said.

The first crude carrier supplying the refinery should arrive in December or January, depending on when the project starts, he added.

Aramco also owns part of the Fujian refinery-petrochemical plant with Sinopec and Exxon Mobil Corp, and has plans to build a 300,000-bpd refinery with China's Norinco. It is also in talks with PetroChina to invest in a refinery in Yunnan.