SINGAPORE: Zhejiang Petrochemical Corp (ZPC), the operator of China's largest refinery under private ownership, announced on Thursday that it has entered into a strategic agreement with state-run refining giant, Sinopec, to jointly market its fuel in the domestic market.
Under the recently finalized agreement, Sinopec will oversee more than 60% of ZPC's domestic sales for refined products, which equates to around 55 billion yuan ($8.0 billion) each year.
China is rapidly expanding its refining capacity by adding more processing plants, despite already having the world's largest capacity. This surge in production is exceeding the growth in fuel demand, leading to intense competition for domestic fuel markets.
As more and more refining capacity is created domestically, the gap between supply and demand for refined fuel becomes increasingly evident. Rongsheng Petrochemical Co Ltd's subsidiary ZPC operates an 800,000 barrels-per-day refinery in the eastern port of Zhoushan, illustrating this widening divide.
In a recent development, Rongsheng Petrochemical has announced its decision to sell a 10% stake in the company to Saudi Aramco, the Middle Eastern energy behemoth, for a whopping $3.6 billion. This deal is not limited to the purchase of the stake, but also includes several other agreements, such as Saudi Aramco supplying crude oil to two of China's refiners, for the next two decades, Rongsheng will be supplying Saudi Arabia with petrochemicals while Zhoushan will provide the Saudis with storage facilities for oil.