Recently, Saudi Aramco said it would suspend an agreement to build an integrated oil refining and petrochemical facility in China to fulfill its recent commitment to reduce capital expenditures. The decision of Saudi Aramco shows that considering the prospects of product prices, the company with the lowest input cost among global oil producers does not believe that this complex will bring good enough profits.
Saudi Aramco did not immediately respond to a request for comment. One of the partners, China North Industries Group, did not immediately respond to the email seeking comment, and the other partner, Panjin Xincheng Group, did not respond to phone calls or emails outside of office hours.
According to insiders, the petrochemical project will continue to advance after Saudi Aramco withdraws.
Back to February 22, 2019, NORINCO, Saudi Arabian Petroleum Company, Liaoning Panjin Xincheng Group Company witnessed the meeting under the witness of the Standing Committee of the Political Bureau of the Central Committee, Vice Premier of the State Council Han Zheng, and Saudi Crown Prince Mohammed bin Salman. Beijing signs a joint venture agreement.
The three parties jointly funded the establishment of a new company, Huajin Ami Petrochemical Co., Ltd., with its registered address in Panjin City, Liaoning Province. North Industries Corporation, Saudi Aramco, and Panjin Xincheng Group hold 36%, 35%, and 29% of the shares respectively. The total investment in the project will exceed 10 billion U.S. dollars. After it is completed and put into production, it will become the largest Sino-foreign joint venture. Tang Yijun, Governor of Liaoning Province, Jiao Kaihe, Chairman of North Industries Corporation, and Amin Nasser, President and CEO of Saudi Aramco attended the signing ceremony.
After the establishment of the joint venture, it will be responsible for the construction and operation of the refining and chemical integration project in Panjin City, Liaoning Province. The project includes 15 million tons/year oil refining, 1.5 million tons/year ethylene, and 1.3 million tons/year p-xylene plants. The project will be commissioned in the second half of 2023.
Sanfang also plans to establish a network of retail gas stations in the target market to provide high-quality refined oil for the local market and better serve the local economic and social development.
Project history review
●In March 2014, the provincial government, Panjin City, China North Industries Group and Huajin Group signed the "Quadruple Agreement."
●In September 2014, the project was listed in the “Petrochemical Industry Planning and Layout Plan” of the National Development and Reform Commission.
●In July 2015, the project completed the environmental assessment and approval reply.
●In January 2016, the 300,000-ton crude oil terminal was approved.
●In April 2016, it was included in the "Several Opinions of the Central Committee of the Communist Party of China and the State Council on the Comprehensive Revitalization of Old Industrial Bases in Northeast China"
●On March 16, 2017, Chinese President Xi Jinping and King Salman of Saudi Arabia held talks in Beijing to witness the signing of the "Memorandum of Understanding on Joint Venture and Cooperation" between China North Industries Corporation and Saudi Aramco.
●In May 2017, a joint project development agreement was signed and a groundbreaking ceremony was held.
●On October 15, 2018, Deputy Secretary of the Liaoning Provincial Party Committee and Governor Tang Yijun led a provincial friendly economic and trade delegation to visit the Saudi Aramco headquarters and met with Nasser, President and CEO of Saudi Aramco. The two sides reached an agreement on further strengthening cooperation Consensus and signed agreement.
●On February 22, 2019, Han Zheng, member of the Standing Committee of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, met with Saudi Crown Prince and Deputy Prime Minister and Minister of National Defense Mohammed, witnessing the signing of a joint venture cooperation agreement by the three parties.
●On March 23, 2019, Huajin Aramco Petrochemical Co., Ltd. was officially inaugurated and established.
In addition, Saudi Aramco's net profit in the first half of the year was US$23.2 billion, a sharp drop from US$46.9 billion in the same period last year, of which the net profit in the second quarter was US$6.6 billion, down 73% year-on-year.
The plunge in oil prices and the impact of the virus on energy demand have changed the way energy companies calculate their projects around the world. Saudi Aramco plans to drastically cut capital expenditures. In the case of low crude oil prices and rising debt, Saudi Aramco is trying to maintain a dividend of $75 billion. Saudi Arabia is the main recipient of Saudi Aramco's dividend, and the country's public finances are suffering severe retrenchment.
