With the closer relationship between China and Arab countries, Saudi Arabia has made frequent "big moves" in its investment in China's chemical industry in recent years, cooperating with many domestic petrochemical enterprises.
Let's take a look at the key developments of Saudi investment and related projects in China's petrochemical industry in 2022:
In March and August 2022, Sinopec and Saudi Aramco signed a memorandum of Understanding (MOU) to cooperate on Sinopec's existing refining and chemical industry and future expansion projects. The two sides will also work together to optimize the operations of their joint venture Fujian United Petrochemical Co., LTD.
On March 10, 2022, Saudi Aramco announced that it has made a final investment decision to participate in the development of a large refining and chemical integration joint facility in Northeast China. Located in Panjin, Liaoning province, the project is expected to become operational in 2024.
On March 17, 2022, the Eco-environment approved the environmental impact statement of the 700,000-ton/year coal-to-olefin New materials Demonstration project (700,000-ton/year coal-to-olefin new materials Demonstration Project of NingCoal Company) of Shenhuining coal-Saudi Basic Industries Corporation. The total investment was 22.04 billion yuan, of which 1.76 billion yuan was invested in environmental protection, accounting for 8.0% of the total investment.
In June 2022, Fujian Province approved Fujian Gulei 1.5 million tons/year ethylene and downstream deep processing consortium project (Zhongsha Gulei Ethylene Project), with a total investment of 42.07 billion yuan, marking the formal landing of the largest one-time investment Sino-foreign joint venture project in Fujian.
On August 3, 2022, Sinopec and Saudi Aramco signed a memorandum of cooperation on a package of cooperation in Saudi Arabia, covering such areas as investment in petroleum and petrochemical projects, oil and refining engineering services, material supply, equipment manufacturing, carbon replenishment and hydrogen energy.
On the afternoon of December 8, 2022, China and Saudi Arabia signed the Comprehensive Strategic Partnership Agreement between the People's Republic of China and the Kingdom of Saudi Arabia. Witnessed by the leaders of the two countries, China and Saudi Arabia exchanged the text of a cooperation document on hydrogen energy in Riyadh, Saudi Arabia. China said it is willing to strengthen communication and coordination with Saudi Arabia on energy policies, expand crude oil trade and strengthen cooperation in exploration and development. The Saudi Arabian side also said that it welcomes more Chinese companies to actively participate in cooperation on major infrastructure construction and energy projects in Saudi Arabia and is willing to strengthen cooperation with China in clean energy and green development.
On December 9, 2022, Saudi Aramco partnered with Shandong Energy Group to jointly explore refining and chemical integration project opportunities in China. According to a memorandum of understanding signed by the two sides, the cooperation includes a potential crude oil supply agreement and chemical offtake agreement to help Saudi Aramco's downstream business prosper in Shandong province.
On December 10, 2022, Sinopec and Saudi Aramco signed a cooperation framework agreement on the Gulei Phase II project in Fujian Province. The Phase II project plans to build a 16 million tons/year refinery and 1.5 million tons/year ethylene cracking and downstream derivatives integrated facility, which is expected to be completed and put into operation by the end of 2025. Sinopec signed a memorandum of understanding with Saudi Aramco and SABIC to jointly develop a large-scale project to convert liquid raw materials into chemical products in Yanbu, Saudi Arabia. The project will be co-optimized with the Yanbu Refinery.
On December 11, 2022, 22 Arab countries, including Saudi Arabia, held in-depth exchanges with China and held all-round discussions on economic and trade cooperation, RMB pricing of oil, how to deal with the global energy crisis and geopolitics. According to Russian media, during the summit, China and Arab countries are expected to sign more than 20 agreements worth more than 30 billion U.S. dollars. According to the evaluation of experts attending the meeting, the shock wave and shock force caused by the China-Arab States summit will be far more than the current Qatar World Cup in full swing.
Recent Saudi cooperation projects in China can be summarized as follows: First, Saudi investment in China is not limited to chemical industry, but also includes investment in energy, plastics and integration projects, among which the integration project investment is one of the priorities. Second, at present, Saudi Arabia's petrochemical industry in China has a relatively wide distribution area, and has a layout in all major petrochemical regions in China. The main projects include: Fujian Joint Integration Project, Fujiangulei Petrochemical, Yanbu Refinery, Panjin Integration Project, Tianjin Zhongsha Petrochemical, Shenhua and Saudi coal-to-olefin Project, etc.
Will Saudi investment in China's petrochemical industry expand further in the future? What impact will it have on China's chemical market?
First, Saudi investment in China's chemical industry may change with China's policy changes. Brother Pingtou believes that Saudi Arabia's current important new project in China is Gulei Petrochemical, which is an integration project jointly built by Saudi Arabia and state-owned enterprises, while the previous cooperation projects are all new integration projects jointly built by state-owned enterprises. New projects in the Chinese market have been an important strategic option for Saudi Arabia to invest in petrochemical projects in the past few years.
However, with the requirements of China for the overall strategic goal of "dual carbon", the requirements of environmental protection, safety and carbon emission policies under this goal have increased the difficulty in the approval of new projects. In particular, the government's overall goal of controlling the refinery capacity to 1 billion tons by 2025 is reducing the possibility of new refinery construction in China, which is unlikely unless it is reserved and planned at the national level.
Under such a policy environment, Saudi Arabia's strategic investment approach in the future may change significantly. Industry speculation, the subsequent Saudi investment logic in China's chemical industry, or will change from "new projects" to "project acquisition".
Second, the cooperation with Shandong Energy may be an opportunity for Saudi Petrochemical to enter Shandong. According to market rumors, Saudi Petrochemical plans to make further investment in China's petrochemical and energy, and has been maintaining a positive and optimistic attitude towards the Chinese petrochemical market. In the past few years, Saudi Arabia has planned deep cooperation with China's largest local petrochemical enterprises, including the acquisition of equity stakes in the enterprises. However, due to the long internal evaluation and approval process, as well as the relatively high profitability of the petrochemical enterprise in recent years, the acquisition became more difficult and finally led to the suspension of the plan.
The cooperation between Saudi Arabia and Shandong Energy Group could signal Saudi Arabia's entry into Shandong's petrochemical industry, as the kingdom is rumored to be in talks with a local petrochemical company under construction in Shandong for further cooperation. If the rumor is true, then another Chinese petrochemical company will enter into a joint venture with Saudi Arabia, which will further expand the Saudi petrochemical industry in China.
Third, the petrochemical industry cooperation between China and Saudi Arabia has a huge impact on China's petrochemical industry. On the one hand, cooperation in energy, including cooperation in natural gas and crude oil, will alleviate China's energy crisis to a large extent and play a positive role in the supply of energy raw materials for Sinopec. On the other hand, the cooperation in the petrochemical industry, mainly in the production of bulk chemicals, as well as the exclusive marketing cooperation of petrochemical products in some integration projects, is conducive to the internal competition of China's chemical industry and enhance the global competitiveness of China's chemical industry.
There is competition, there is cooperation, cooperation in competition, competition in cooperation. Joint ventures are an important force in the future pattern of China's petrochemical industry.
