Saudi Aramco deal in China includes storage space for crude ‎and petrochemical supplies

Saudi Aramco’s new refinery deal to buy a 10 percent stake in Chinese chemical group Rongsheng Petrochemical includes agreements to store crude oil in eastern China and supply plastics and petrochemicals to the energy giant in the Middle East.

According to Reuters, Aramco announced on Monday the purchase of the stake in Rongsheng Petrochemical, which owns a controlling stake in Zhejiang Petrochemical, which operates the largest refinery in China with a capacity of 800,000 barrels per day, and the conclusion of an agreement to supply crude for a period of 20 years.

Rongsheng stated in a disclosure on Tuesday to the Shenzhen Stock Exchange that the first Saudi agreement to store oil in China includes that Qiang Company provides Aramco with space to store three million cubic meters (about 18.6 million barrels) in the Zhoushan port in eastern China.

Aramco, the world’s largest crude oil exporter, has long looked for storage space in China to store crude closer to Asian customers and to be able to meet demand in the region more quickly.

China, Aramco’s largest crude importer, is also likely to import record amounts of oil this year as its economy recovers from the coronavirus pandemic.

According to the disclosure, Aramco is committed to a minimum target storage level of 1.5 million tons (about 11 million barrels) in Zhoushan, and in the event that the storage volume falls below 750,000 tons, Aramco will have to limit its supplies to Zhejiang.

Aramco’s only crude oil storage site in Asia is currently located in Okinawa, Japan, where the state-run company last December renewed an agreement to store about eight million barrels.

In addition to the agreement announced on Monday to supply 480,000 barrels per day of crude, Aramco also agreed to supply Rongsheng – one of China’s largest polyester producers – with petrochemical feedstocks such as naphtha and paraxylene. Paraxylene is a raw material for the manufacture of synthetic fibers and plastic bottles

The disclosure said that Rong Sheng will provide Aramco with 800,000 tons per year of polyethylene and polypropylene, used in the plastics industry, and 300,000 tons per year of other chemical products over a period of 20 years.