Saudi Aramco, Sinopec sign Yanbu refinery deal
By SUMMER SAID
State-giant Saudi Arabian Oil Co., or Aramco, signed a deal with China Petrochemical Corp., or Sinopec, to develop a 400,000 bpd oil refinery at Yanbu, on the Saudi Red Sea coast.
Saudi Aramco chief executive Khalid al-Falih said the project will cost $8.5 billion if the capital is provided by the two partners.
But he said that Aramco and Sinopec may decide to use borrowing to fund the refinery project, in which case total costs could rise to $10 billion.
"We will enter into discussions about what is the optimal capital structure. And if we choose to finance the project ... and the cost of debt will be capitalized, and the cost of the project can grow above $8.5 billion," al-Falih said.
Sinopec will hold a 37.5% stake in the project, known as Yasref, while Saudi Aramco will own 62.5%. The refinery is due to start operations in 2014. Sinopec is Asia's biggest oil refiner by capacity.
US oil major ConocoPhillips last year pulled out of the Yanbu project after deciding to cut back on refining and marketing activities.
The Aramco-Sinopec deal marks the latest effort by China and Saudi Arabia to strengthen energy ties.
Last year, Aramco agreed an initial deal with PetroChina to supply crude oil to a new refinery in southwest China, in a move that will help cement Saudi Arabia's position as China's top crude supplier.
China surpassed the US as the biggest importer of oil from Saudi Arabia in 2009, and the kingdom's crude is an increasingly important factor in powering the nation's growth.
Energy demand is rising rapidly in China, driven by rapid industrialization and a growing middle class.
Saudi Arabia shipped nearly 45.5 million tons of crude to China between January to November last year, up from 44.6 million tons in 2010, according to data from China's General Administration of Customs.
Significant volumes are shipped to a Sinopec-operated joint venture refinery in southern China's Fujian province, in which Aramco has a near-25% stake.
Dow Jones Newswires
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