Aramco plans to bolster China investments with 10% stake in Hengli Petchem

Saudi Aramco, the world’s biggest oil producer, said on Monday that it is in talks to acquire a 10 per cent stake in Hengli Petrochemical, a deal that will significantly expand the state-owned energy giant’s refining presence in China.

Hengli Petrochemical, which is owned by Hengli Group, owns and operates a 400,000 barrel per day (bpd) refinery and integrated chemicals complex in China’s Liaoning Province. It also runs several plants and production facilities in Jiangsu and Guangdong Provinces.

“This MoU supports our efforts to grow our global downstream footprint. We continue to explore new opportunities in important markets, as we seek to progress in our liquids-to-chemicals strategy,” said Mohammed Y. Al Qahtani, Aramco Downstream President.

“We look forward to forging new partnerships and are excited by the prospect of expanding our presence in the important Chinese market.”

The energy giant said the potential deal aligns with its strategy to expand its downstream presence in key high-value markets, advance its liquids-to-chemicals program, and secure long-term crude oil supply agreements.

Over the years, Aramco has been ramping up its presence in China’s refining and petrochemicals market. Its chief executive Amin Nasser said earlier in 2024 that oil demand is healthy and growing in the world’s second-biggest economy.

Aramco’s China investments

Meanwhile, a potential deal would be the latest in a string of Aramco deals with Chinese refiners.

Earlier this year, Aramco and China’s oil refining giant Rongsheng Petrochemical (Rongsheng) said they were in talks to buy a 50 per cent stake in each other’s refineries in China and Saudi Arabia.

Last July, the Dhahran-based firm closed the $3.6bn (SAR784bn) acquisition of a 10 per cent stake in China’s oil refining giant Rongsheng Petrochemical through its subsidiary, Aramco Overseas Company.

The deal includes the supply of 480,000 bpd of Arabian crude oil to Rongsheng-controlled Zhejiang Petroleum and Chemical Company (ZPC) for 20 years.

The company’s Chinese joint venture, Huajin Aramco Petrochemical Company (HAPCO) commenced the construction of a major refinery and petrochemical complex in the country’s northeastern Liaoning province in H2 2023, accelerating developments that were paused during the pandemic.

Aramco’s CEO said in March that refineries were some of the most fully integrated and had the highest conversion rates and the company was considering further investment opportunities.

“We expect it to be fairly robust, we are looking at growth of about 1.5 million barrels,” Nasser said.

With a market capitalisation of SAR7.4tn as of April 22, 2024, the company’s full-year net profit plunged by 24.7 per cent to SAR454.8bn on lower oil prices.

Read: Aramco sees China demand growing, eyes more investments