Saudi Aramco and China National Petroleum Corp. agreed to build a 200,000 barrel-a-day refinery in southern China as producers seek to meet rising fuel demand in the world s fastest-growing major economy.
The state oil company of Saudi Arabia signed a memorandum of understanding on March 17 with CNPC unit PetroChina to build the facility in China s Yunnan province, Aramco said in a statement on its website today. It s the second refinery partnership Aramco has announced with a Chinese company in a week.
Aramco is participating in oil processing and storage projects in Asia to improve access to markets there amid the region s increasing consumption of fuel and crude. China may increase refining capacity by one-third to more than 12 million barrels a day by 2015 to feed economic growth, the U.S. Energy Information Administration said on its website.
Saudi Arabia is looking at demand dynamics, John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh, said by e-mail today. China, and Asia, is a very strategic and important demand driver. Aramco is aware that China and Asia are the markets that drive demand given macro fundamentals.
Fuel demand is rising in China, spurred by economic and population expansion. Car sales in China gained 16.2 percent from a year earlier to 1.53 million units in January, according to the China Association of Automobile Manufacturers. The nation s rural incomes rose the most in a quarter century last year, a statistics bureau report showed Jan. 20.
The planned 200,000 barrel-a-day refinery in China s Yunnan will process Arabian crude into products including low-sulfur gasoline and diesel, Aramco said in the statement. Aramco will supply the refinery with crude through a long-term contract, and PetroChina will market the refined products.
Aramco didn t give an exact location for the plant or say how much the facility would cost. The proposed refinery will be in a southwestern area of China linked by a $2 billion oil and natural gas pipeline project from Myanmar. Shipping oil through the pipeline from Myanmar would cut sailing times needed to reach the Chinese coast from the Persian Gulf.
CNPC, China s largest oil company, said in September it had started building the Chinese section of the oil and gas pipelines linking the world s largest energy consumer to Myanmar, formerly known as Burma. It also said it had begun building an oil refinery there. The September statement didn t give the refinery s capacity. The pipelines and refinery are set to be completed in 2013, CNPC said in September.
The pipeline would be able to supply 22 million metric tons of crude oil to Yunnan province per year, more than twice the 10 million-ton annual crude-processing capacity the Aramco- PetroChina refinery is set to have. That facility will be a grassroots plant, Aramco said, and it was unclear whether the facility announced today was the same as the one CNPC said it had started building in September.
