Saudi Aramco signs agreement for $12.2 billion oil refinery and petchem complex in China.

At the oil facility in Abqaiq, Saudi Arabia, on October 12, 2019, the Saudi Aramco logo can be seen.

SG – Singapore

In order to address the country’s rising need for gasoline and chemicals, Saudi Aramco and Chinese partners on Sunday inked a contract for an oil refinery and petrochemical project in northeast China that is scheduled to begin in 2026.

Aramco’s project in the city of Panjin in the Liaoning province will be the company’s second significant refining-petrochemical investment in China and comes after the top oil exporter in the world announced a record profit of $161 billion in 2022.

State-owned Aramco said in a statement that joint venture Huajin Aramco Petrochemical Company (HAPCO) will construct and run the complex that will house a 300,000 barrels per day (bpd) oil refinery and a cracker with a capacity to produce 1.65 million tonnes of ethylene and 2 million tonnes of paraxylene annually.

Partner Panjin Xicheng Industrial Group announced the project’s anticipated cost of 83.7 billion yuan ($12.2 billion) in a statement on WeChat on Sunday.

The complex’s construction will begin in the second quarter once the project receives the necessary administrative approvals, according to Aramco. By 2026, the facility is anticipated to be completely operating, it was noted.

51% of HAPCO is controlled by the Chinese military equipment manufacturer NORINCO Group, a state-owned company, while 30% and 19% each are held by Aramco and Panjin Xincheng.

Separately, according to a post on the website of the provincial government, Aramco signed a memorandum of understanding on Sunday with the province of Guangdong in southern China to explore opportunities for collaboration in areas such as energy, finance, research, and innovations.

Global companies like Exxon Mobil (NYSE:) and BASF have established sizable petrochemical complexes producing high-value chemicals in Guangdong, the province with the largest economy in China.

One of them is the Zhejiang province government investing 9% of its funds in Zhejiang Petrochemical Corp., which runs the country’s biggest refinery and has the capacity to process 800,000 bpd of oil.

The other is a partnership with Shandong Energy that may involve a crude supply arrangement, a chemical product offtake agreement, and discussions about working together on a combined refining and petrochemical complex in China.

Earlier in March, Saudi Aramco (TADAWUL:) also started construction on a $7 billion project to create petrochemicals from crude oil at the Ulsan port-city refinery of its South Korean partner S-Oil Corp.