China: Saudi Aramco has finalized a deal to acquire a 10% stake in the esteemed private Chinese chemical group, Rongsheng Petrochemical. As part of the agreement, Saudi Aramco has secured crude oil storage in eastern China, along with a 20-year crude supply deal. The deal also entails the supply of plastics and petrochemicals to the energy giant in the Middle East. Rongsheng Petrochemical owns Zhejiang Petrochemical Corp, which is the largest refinery in China with a capacity of 800,000 barrels per day (bpd).
Saudi Arabia's oil giant, Aramco, will utilize a storage capacity of 3 million cubic metres (equivalent to roughly 18.6 million barrels) provided by ZPC, the company's joint venture with China's Rongsheng Petrochemical. The new storage space will be in the east China port of Zhoushan. Aramco has been actively seeking storage arrangements in China to hold crude oil nearer to Asian customers and to cater more efficiently to the region's needs.
China, which is the largest importer of crude oil from Saudi Arabia, is poised to break its own record for importing more oil this year, as its economy recovers from the COVID-19 pandemic. As a part of its agreement with Zhoushan, Aramco plans to maintain a minimum storage level of 1.5 million tonnes (approximately 11 million barrels). In case the storage volumes fall below 750,000 tonnes, Aramco will need to limit its supply to ZPC. Aramco's sole storage location in Asia is situated in Okinawa, Japan, where the company had renewed a deal for storing roughly 8 million barrels in December last year.
In a recent announcement, Aramco has signed a crude supply agreement for 480,000 barrels-per-day and has also agreed to provide petrochemical feedstocks such as Naphtha and Paraxylene to Rongsheng, one of China's largest polyester manufacturers. Paraxylene serves as a critical component for plastic bottles and synthetic fibers. To reciprocate this deal, Rongsheng Petrochemical will supply Aramco with 800,000 tonnes of plastic raw materials like Polyethylene and Polypropylene, along with 300,000 tonnes of other chemical products annually throughout the 20-year agreement period.