Jan. 14 (Bloomberg) -- Saudi Arabian Oil Co. and China Petroleum & Chemical Corp. will develop a refinery in Saudi Arabia at a cost of as much as $10 billion and are in talks to build another in China, their second in the country.
The 400,000 barrel-a-day plant in the western city of Yanbu is likely to start output in 2014, Saudi Aramco Chief Executive Officer Khalid al-Falih told reporters today after signing the deal with the Chinese company known as Sinopec.
Sinopec is in talks with Aramco and Exxon Mobil Corp., its partners in the Fujian refinery in China, on plans to build a 240,000 to 300,000 barrel-a-day refinery, al-Falih and Sinopec Chairman Fu Chengyu said at a press conference in Dhahran, Saudi Arabia. The partners also plan to expand capacity at the Fujian plant.
The announcement comes during a visit to Saudi Arabia by Chinese Premier Wen Jiabao aimed at deepening ties between the world’s largest crude exporter and second-largest importer. Aramco is participating in oil-processing and storage projects in China and elsewhere in East Asia to take advantage of the region’s increasing consumption of fuel and crude.
The Fujian expansion includes upgrading of the refinery’s crude processing unit with “debottlenecking” and expanding the ethylene cracker from 800,000 tons a year to 1.2 million tons a year, al-Falih said. The companies will make an investment decision on the expansion in coming months, he said.
Aramco’s refining capacity will reach 8 million barrels a day over the next decade, with most additional capacity planned in China, al-Falih said. The company is expanding refining and petrochemical production to meet domestic demand and export refined products that can fetch higher prices than crude.
The Saudi plant will cost $8.5 billion to $10 billion, and financing hasn’t been finalized yet, al-Falih said. The project is the fourth venture between the two companies. “We are bringing Sinopec with us in this project to help in marketing the products and to share the cost,” he said.
Sinopec agreed in March to take a 37.5 percent stake in the Red Sea refinery, known by its acronym Yasref. The Chinese company decided to invest in the project after ConocoPhillips withdrew last year.
Sinopec is Aramco’s largest Chinese customer. The company sources around 800,000 barrels of crude a day from the Saudi supplier, Fu said.
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