China, Saudi Arabia Announce Massive Strategic Partnership Energy Agreement
Links China’s Belt & Road Initiative with the Saudi Vision 2030 National Development Plan and bodes well for UAE based services and product suppliers.
The world’s largest oil-exporting company Saudi Arabian Oil Company (Saudi Aramco) has signed a memorandum of understanding (MoU) with China Petroleum & Chemical Corporation (Sinopec). According to an official statement from Aramco, the agreement outlines “pathways for strategic cooperation between Aramco and Sinopec and supports the long-term relationship between the two companies and their existing joint ventures in China and in the kingdom”.
Mohammed Y Al Qahtani, Aramco SVP of Downstream, said: “We are delighted to be able to extend our relationship with Sinopec and leverage our mutual strength and reach while creating a path to bring our long-standing cooperation in China to our facilities in Saudi Arabia. This latest collaboration will help to further advance our strategic relationship with Sinopec into key areas of mutual benefit within the kingdom.”
Yu Baocai, president of Sinopec, said: “Aramco is a very important partner of Sinopec. The two companies have yielded fruitful collaborations and developed a deep friendship over the years. The signing of the MoU introduces a new chapter of our partnership in the kingdom. The two companies will join hands in renewing the vitality and scoring new progress of the Belt and Road Initiative and Saudi Vision 2030.”
The companies will jointly assess refining and petrochemical integration opportunities; engineering, procurement, and construction; oilfield services, upstream and downstream technologies, and in the areas of carbon capture and hydrogen processes. The companies will also discuss the opportunities for the establishment of a local manufacturing hub in the King Salman Energy Park. That has implications for international investors wanting to supply products and services as part of the procurement needs – with the nearby United Arab Emirates being the obvious choice to operate as a procurement office for product sourcing from the United States, Europe, Asia and beyond for servicing the needs.
This latest collaboration builds on existing joint ventures between the two companies, including Fujian Refining and Petrochemical Company (FREP) and Sinopec Senmei (Fujian) Petroleum Company (SSPC) in China, and Yanbu Aramco Sinopec Refining Company (YASREF) in Saudi Arabia, and is part of, and updates the US$65 billion BRI agreement originally made between the two countries in 2017.
The deal is a critical step in China’s ongoing strategy to secure Saudi Arabia as a client state, and an important step in the role of the Belt & Road Initiative, which is increasingly aligning its outbound development and financial commitments to other countries national development plans, such as Egypt, and international plans such as the UNSDG.
The scale and scope of the China-Saudi MoU is significant, covering deep and broad co-operation in refining and petrochemical integration, engineering, procurement and construction, oilfield services, upstream and downstream technologies, carbon capture and hydrogen processes. The development of the King Salman Energy Park is also likely to spill over into other manufacturing sectors over time.
Saudi Arabia is the economic giant of the Middle East, and highly influential throughout the region. Traditionally Islamic conservative, there are plans to gradually introduce more liberal reforms, including the potential development of Western-style beach resorts on the Red Sea opposite the Egyptian coast which has seen developments such as Sharm-el-Sheikh become popular. It follows on from Russian energy investments into Iran that could reach US$40 billion under agreements made between Moscow and Tehran last month.
China’s President Xi Jinping has announced a visit to Saudi Arabia next week, which is expected to take in Riyadh, Jeddah, and the planned megacity of Neom on the western Saudi coast.