Saudi Arabia's state-owned oil company Saudi Arabian Oil Co. on Saturday signed a 32 billion Saudi riyal or $8.53 billion joint venture deal with China Petroleum & Chemical Corp. or Sinopec (SNP: Quote) to set up an oil refinery in the Saudi Red Sea port of Yanbu, according to media reports. This is the fourth joint venture between Sinopec and Saudi Arabian Oil Co, or Saudi Aramco.
The oil refinery, known as the Yanbu Aramco Sinopec Refining Co. Ltd. or Yasref, will reportedly begin production in the second half of 2014 and process 400,000 barrels of heavy crude a day. The cost of the project could rise to $10 billion if Aramco and Sinopec decide to use borrowing to fund the project.
Saudi Aramco will hold a 62.5 percent stake in the plant and Sinopec will own the remaining 37.5 percent, making it the largest Chinese investment in Saudi Arabia. It may be noted that ConocoPhillips (COP) had pulled out of the project more than a year back to focus more on oil and gas exploration and to cut down on its refining activities.
The refinery is said to be already under construction and will be spread over an area of 5.2 million square meters. The facility's location in Yanbu, next to two other refineries, is noted as being ideal for supplying both overseas markets and Saudi Arabia's fast-growing Western region. Yasref will reportedly create 1,200 direct jobs and over 5,000 indirect jobs.
China is currently Saudi Arabia's largest crude oil market. Sinopec, the largest producer and supplier of oil products in Asia, is already Aramco's top crude oil customer.
In late March 2010, Saudi Aramco signed an initial deal with PetroChina Co. Ltd. (PTR), a unit of China National Petroleum Corp., related to the planned development of a 10 million metric tons per annum grassroots full conversion refinery in Yunnan Province in the People's Republic of China.
Saudi Aramco reportedly plans to increase its refining capacity to 8 million barrels per day in the next decade through expansion.
SNP closed Friday's trading at $14.13, down $0.06 or 0.05 percent on a volume of 102,531 shares.
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by RTT Staff Writer
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