Aramco completes $3.4bn deal for 10% stake in Rongsheng Petrochemical

Image courtesy: Saudi Aramco

Saudi Aramco, the world’s biggest oil producer, has completed the $3.6bn (SAR784bn) acquisition of a 10 per cent stake in China’s oil refining giant Rongsheng Petrochemical (Rongsheng) through its subsidiary, Aramco Overseas Company.

The transaction, which was first announced in March 2023, significantly expands the state-owned energy giant’s refining presence in China. The Dhahran-based firm said the deal includes the supply of 480,000 barrels per day (bpd) of Arabian crude oil to Rongsheng-controlled Zhejiang Petroleum and Chemical Company (ZPC) for 20 years.

“Our strategic partnership with Rongsheng advances Aramco’s liquids to chemicals strategy while growing our presence in China and showcases our importance as a reliable supplier of crude oil,” said Mohammed Y. Al Qahtani, Aramco Downstream president.

“This key acquisition is an important part of Aramco’s long-term growth strategy, expanding our presence in a vital market.”

Rongsheng owns a 51 per cent equity interest in ZPC, which in turn owns and operates the largest integrated refining and chemicals complex in China with a capacity to process 800,000 bpd of crude oil and to produce 4.2 million metric tons of ethylene per year.

The deal involves an off-market secondary sale of Rongsheng shares by majority shareholder Zhejiang Rongsheng Holding Group, with the potential for future collaboration between the parties in trading, refining, chemicals production and technology licensing. It is expected to close at the end of the year, subject to regulatory approvals.

Aramco bumps up presence in China

Meanwhile, Aramco’s joint venture (JV) in China, Huajin Aramco Petrochemical Company (HAPCO) commenced the construction of a major integrated refinery and petrochemical complex in China’s northeastern Liaoning province in the second half of the year, accelerating developments that were paused during the pandemic.

The state-energy firm, which owns a 30 per cent stake in HAPCO, will supply up to 210,000 bpd of crude oil feedstock to the complex. China’s NORINCO Group and Panjin Xincheng Industrial Group own 51 per cent and 19 per cent, respectively.

In March, Aramco’s president & CEO Amin Nasser told the China Development Forum 2023 that the company is doubling down on China’s energy supply including new lower carbon products, chemicals and advanced materials – all supported by emissions reduction technologies.

The company said capital expenditures and external investments in the Q1 2023 were SAR32.8bn and SAR9.9bn, respectively. It is targeting capital expenditure of $45bn to $55bn for 2023.

With a market capitalisation of SAR7.8tn as of July 21, 2023, the oil major reported first-quarter net profits of SAR199.6bn, a 19.25 per cent decrease compared to $39.5bn during the same period a year earlier.

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