From its first crude oil cargo delivery to China 27 years ago, Saudi Aramco has provided the energy that has powered China’s rapid and intense modernization. It’s a relationship that has benefited both countries, through two very complementary development strategies.
With the Kingdom’s Saudi Vision 2030 plan, Saudi Arabia is welcoming Chinese investment, engineering, and cooperation to help provide the necessary power and infrastructure that can efficiently forge new manufacturing bases, logistical hubs, and technology centers.
And through China’s Belt and Road Initiative, China is enhancing its own powerful manufacturing-based economy by building the global infrastructure corridors, by land and sea. It’s an initiative that can accelerate growth across the Asia Pacific region and Central and Eastern Europe.
Linked together, these two development strategies make Saudi Arabia and China natural and reliable partners for decades to come.
The latest advance in this joint success story includes an agreement toward a new jointly owned refinery in China’s Liaoning Province that was part of a Memorandum of Understanding by Saudi Aramco and the Chinese company NORINCO announced Tuesday in Riyadh. A delegation from NORINCO visited company facilities last week.
The project significantly expands Saudi Aramco’s footprint in China’s downstream industry, and highlights the paramount importance of the Chinese economy for Saudi and for Saudi Aramco’s future investments. It will also enhance the competitiveness of NORINCO’s petrochemical and value-added chemical divisions and promote the overall economic revitalization of Liaoning and Panjin.
Key building block
This project will potentially become a key building block in both companies’ portfolios and a new landmark in the industry since it has all the ingredients for integration, optimization, capital efficiency, and is located in a very promising region. Both partners will bring their best practices in project management, execution, and operations, to add value to this project.
While global demand for energy continues to grow, it is China where the demand for crude oil and gas has grown at the fastest rates. And Saudi Aramco has been there, meeting its need. From 2006 to 2016, Saudi Aramco was China’s No. 1 crude oil supplier, and it seems likely that the company will regain that position in 2018, as recent exports reach up to 1.7 million barrels per day.
The synergy of this partnership can be seen in how seamlessly the two development strategies work together. Saudi Aramco’s world-class integrated refinery and petrochemical complex in Fujian Province currently supplies local Chinese markets with refined products and chemicals. By developing new refining and petrochemical facilities such as that with NORINCO, Saudi Aramco is making further investments in China’s energy sector that will help to meet the needs of China well into the future. Integrated, high conversion refining and petrochemical complexes will produce more of the petrochemical products that China needs, while ensuring the fuels produced from the same facilities meet China’s highest standards.
Strategically placed
By developing critical infrastructure here in Saudi Arabia, through China’s Belt and Road Initiative, serves the strategic interests of both countries. Geographically, Saudi Arabia is strategically placed as a manufacturing and logistics hub, and as a transportation corridor to African, Asian, European, and Arabian Gulf markets.
Vision 2030 is prompting significant investment activities and major infrastructure projects in Saudi Arabia such as Jazan Economic City, the King Abdullah Port expansion, the King Abdullah Economic City, and the Ras al-Khair Industrial Port development. All of these, and others, present a landscape of exciting new investment opportunities.
The Kingdom’s ties with China over the past three decades have deep roots, of course, extending back to a time when both countries were global players in ancient international trade. But today, that relationship has matured into a thriving partnership. Already in Saudi Arabia, more than 160 Chinese companies are operating in such fields as engineering, procurement, construction, telecommunications, infrastructure development, and others.
One Chinese company, SINOPEC, is Saudi Aramco’s joint venture partner in YASREF — a 400,000 barrels per day, full conversion refinery in Yanbu’ on the Red Sea coast. In addition, a growing array of Chinese goods is available in the Saudi marketplace, from trucks and automobiles to consumer goods, home appliances, and information technology equipment.
Saudi Aramco’s role in powering the Chinese economy, meanwhile, is well-established and growing stronger. Our customers in China are some of the biggest names of the Chinese transformation story. Today, Saudi Aramco supplies refineries owned by SINOPEC, CNPC, CNOOC, NORINCO, and Hengli. We have also signed a crude oil supply agreement with Zhejiang Petrochemical (Rongsheng) and expect shipments to begin soon.
Common challenge
The relationship goes far beyond oil and gas. Saudi Arabia and China are exploring a common challenge of how to sustain economic growth and vitality for generations to come. Saudi Arabia and China are currently partnering in the development of technologies to produce more efficient, lower carbon petroleum energy to power prosperity for billions of people around the world.
Taking full advantage of its prime location for the generation of solar power, Saudi Arabia is collaborating with Chinese research and technology institutions in the development of clean alternative energy from solar and nuclear sources.
Traditional sectors are also areas of growth targeted by Vision 2030. Opportunities exist for Chinese companies in areas such as refining and chemicals, advanced manufacturing, heavy industry, as well as mining and minerals processing.
Taken together, Vision 2030 coupled with the One Belt, One Road initiative, present new opportunities for China and Saudi Arabia to go beyond the current level of collaboration and partnership and contribute even more to the development of the two countries.
Photo caption: Officials from NORINCO join members of Saudi Aramco management in touring facilities in the Eastern Province, including the Oil Supply Planning and Scheduling facility in Dhahran. (Photo: Hatim Oweida/MPD)