Usurped by Russia, OPEC's biggest producer is now trying to regain ground in China
Saudi Arabia’s status as the biggest oil supplier to China has been usurped by Russia. OPEC’s biggest producer is now trying to regain ground in the world’s largest crude importer.
State-run Saudi Arabian Oil Co, known as Aramco, is in supply talks with petrochemical conglomerates that are building some of the world’s biggest plants in China, said Mushabab Al-Qahtani, vice president of the marketing department at its Asia unit, without identifying the firms. He also sees the country expanding imports of sulfurous sour crude - the type typically pumped by the Middle East nation.
Firms currently forging facilities include Rongsheng Petrochemical Co, which is building a $24 billion refinery in Zhejiang province, and Hengli Group that’s planning a plant in the Liaoning region.
As Saudi Arabia led OPEC’s output cuts this year to shrink a global glut, it’s lost out on market share in the world’s biggest energy consumer. Russia in September retained the top Chinese supplier spot for the seventh straight month, while the kingdom was third.
“China is one of our oldest and largest customers,” Al-Qahtani said at the China International Oil and Gas Trade Congress in Shanghai on Thursday. “In recent years, growth in China has slowed as incremental demand preferred low-sulfur crude and as Aramco is implementing OPEC cuts. However, Aramco still has ambitious plans for China.”
The 2.2 million barrels a day of refining capacity China is planning to add by 2022 is designed to run mostly sour crude, and Saudi Arabia is ready to meet that demand, according to Al-Qahtani. “In fact, China will need much more sulfur crude in the future.”
About 60 percent of China’s oil imports in 2017 were sour crude, of which 23 percent came from Saudi Arabia, he said. Aramco, which is pursuing a partnership with China National Petroleum Corp to buy a stake in the 260,000 barrel-a-day Anning refinery in Yunnan province, expects to make an investment decision on the project by early next year, Al-Qahtani said in an interview.
The company is also taking steps toward making a final investment decision on building an integrated refining and petrochemical facility with China North Industries Group in Liaoning, he said.
Saudi Aramco has been pursuing a strategy of investing in refining to help lock in demand for its crude, and has previously also signed agreements for stakes in Malaysian and Indonesian projects.For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.