Saudis eye oil sales to China’s huge plants

Aramco in supply talks with petrochemical conglomerates building some of the world’s biggest plants

Saudi Arabia’s status as the biggest oil supplier to China has been usurped by Russia. The biggest producer in the Organisation of Petroleum Exporting Countries (Opec) is now trying to regain ground in the world’s largest crude importer.

State-run Saudi Arabian Oil Company, Aramco, is in supply talks with petrochemical conglomerates that are building some of the world’s biggest plants in China, said Mushabab Al Qahtani, vicepresident of the marketing department at its Asia unit, without identifying the firms. He also sees the country expanding imports of sulphurous sour crude — the type typically pumped by the Middle East nation.

Firms currently forging facilities include Rongsheng Petrochemical Co., which is building a $24 billion (Dh88 billion) refinery in Zhejiang province, and Hengli Group that’s planning a plant in the Liaoning region. As Saudi Arabia led Opec’s output cuts this year to shrink a global glut, it’s lost out on market share in the world’s biggest energy consumer. Russia in September retained the top Chinese supplier spot for the seventh straight month, while the kingdom was third.

“China is one of our oldest and largest customers,” Al Qahtani said at the China International Oil and Gas Trade Congress in Shanghai yesterday. “In recent years, growth in China has slowed as incremental demand preferred lowsulphur crude and as Aramco is implementing Opec cuts. However, Aramco still has ambitious plans for China.”

The 2.2 million barrels a day of refining capacity China is planning to add by 2022 is designed to run mostly sour crude, and Saudi Arabia is ready to meet that demand, according to Al Qahtani. “In fact, China will need much more sulphur crude in the future.” Iraq has hired Japan’s Toyo Engineering to help build a gas pipeline to Kuwait and a related petrochemical plant as Baghdad looks to reduce flaring and finish paying reparations owed for its 1990 invasion of its neighbour.

The project would allow Kuwait to diversify its gas imports. It would also deal a blow to Royal Dutch Shell, which aimed to be the dominant gas player in Iraq before relations with Baghdad soured following Shell’s exit from large oil projects. “Iraq needs to urgently reduce gas flaring as it trails behind all targets it has promised the World Bank,” said a senior industry source.