MOSCOW (MRC) -- Saudi Aramco has suspended plans to participate in a joint venture (JV) to build a USD10-billion refining and petrochemicals complex at Liaoning, China, as the company cuts spending in response to continued low oil prices, according to Bloomberg with reference to people familiar with the matter.
Aramco decided to stop investing in the JV project after negotiations with its Chinese partners, said the people, who asked not to be identified as the matter is private. The uncertain market outlook was behind the decision, they said. Aramco declined to comment, while neither of the two Chinese partners, China North Industries Corp. (Norinco) and Panjin Xincheng, responded to emails seeking comment, according to Bloomberg.
Aramco has implemented significant cuts in its capital expenditure for this year in the low crude oil price environment and uncertain macro-economic climate.
The JV agreement was signed when Saudi Crown Prince Mohammed bin Salman visited Beijing in February last year, with Aramco, Norinco, and Panjin Xincheng to form an entity called Huajin Aramco Petrochemical Co. Under the terms of the agreement, Saudi Arabia was to supply up to 70% of the crude for the fully integrated 15-million metric tons/year (MMt/y) oil refinery and petchems complex, which was planned to include a 1.5-MMt/y steam cracker producing ethylene and a 1.3 MMt/y paraxylene unit. Aramco was to have owned 35% of the JV, with Norinco and Panjin holding 36% and 29%, respectively.
The Chinese participants will press ahead with the project in Panjin city, Liaoning Province, according to the sources. The JV remains an option for the future, they said. The announcement last year put the expected start of operations for the complex in 2024.
The JV signing last year followed an agreement in 2017 between Aramco and Norinco to explore a potential greenfield refinery and chemical plant at Panjin, as well as the upgrading of a refinery and petchems facility at the same site.
Besides, as MRC reported before, Saudi Aramco exited plans to participate in a refinery and aromatics JV with Pertamina in Indonesia earlier this year.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.
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