Aramco shifts strategy in China to boost oil sales

dubai — Rising Russian and US competition has pushed Saudi Aramco to find new buyers for its oil in China, encouraging a shift towards independent refiners and newcomers to the business.

It reflects a new strategy for the Saudi Arabian oil giant after years of dealing almost exclusively with major state-owned Chinese energy firms, industry sources say.

But the change in tack may not offer the same returns. Aramco’s new partners lack the scale and marketing reach of PetroChina and Sinopec Corp, the state-run firms that dominate China’s refining, petrochemical and retail fuel business, analysts say.

Aramco had been talking to PetroChina for years about a refining venture in Yunnan province in the southwest, but industry sources said the plans had been effectively shelved due to poor economics and disagreement over marketing rights.

Aramco, which did not immediately respond to a Reuters request for comment for this report, has instead turned to new and independent players in China’s refining and petrochemical industry. In February, it agreed to form a venture with Chinese defence conglomerate Norinco to develop a $10 billion refining and petrochemicals complex in the city of Panjin, in the northeast province of Liaoning.

It also signed memorandums of understanding to expand its activities in Zhejiang province in the east. The plans include buying 9 per cent of Zhejiang Petrochemical to secure a stake in a 800,000 bpd refinery and petrochemicals complex in the city of Zhoushan, south of Shanghai.

The deals are part of a strategy shift to court new buyers, including smaller, independently run refiners, known as “teapots”, industry sources say. “The private players are more open and entrepreneurial. They also need the oil and the experience,” said one source familiar with the recent deals in China.