DHAHRAN: Saudi Aramco and Sinopec Group of China took another giant leap forward with the signing on Saturday of a landmark SR32 billion ($8.5 billion) joint venture agreement to set up an ultramodern, highly sophisticated, full-conversion oil refinery in Yanbu.
Called simply YASREF, the Yanbu Aramco Sinopec Refining Co. Ltd. will begin production in the second half of 2014, processing 400,000 barrels of heavy crude a day. Saudi Aramco will hold a 62.5 percent stake in the plant while Sinopec Group will own the remaining 37.5 percent.
Saudi Aramco President and CEO Khalid Al-Falih and Sinopec Group Chairman Fu Chengyu signed the agreement at the Saudi Aramco headquarters here in Dhahran in the presence of Minister of Petroleum and Mineral Resources Ali Al-Naimi; Prince Saud bin Abdullah bin Thunayan, chairman of the Royal Commission for Jubail and Yanbu; Prince Faisal bin Turki, adviser to the minister of petroleum mineral resources; Dr. Khalid S. Al-Sultan, rector of King Fahd University of Petroleum and Minerals; Riyadh Chamber of Commerce and Industry Chairman Abdul Rahman Al-Jeraisy; Asharqia Chamber Chairman Abdul Rahman Al-Rashed and a number of leading Saudi and Chinese businessmen.
"This is the fourth joint venture between our two enterprises," said Al-Falih. "YASREF takes its rightful place next to our two downstream companies in China's Fujian Province, and our in-Kingdom upstream joint venture, Sino-Saudi Gas Ltd.," he said and proudly pointed out that Sinopec was Saudi Aramco's largest crude oil customer. YASREF will create 1,200 direct jobs and over 5,000 indirect jobs.
"It holds enormous potential and promise, because it will boost the Saudi economy and create new opportunities for local enterprises and entrepreneurs," said Al-Falih.
As Asia's largest producer and supplier of oil products, Sinopec Group brings technical and commercial expertise to the joint venture while Saudi Aramco adds value with its unparalleled strengths in resources, management and host advantage. The refinery is already under construction and will be spread over an area of 5.2 million square meters. Its giant size can be gauged from at least two facts. During the refinery's construction more than 80,000 tons of structural steel will be utilized which is enough to construct a new Golden Gate Bridge; and 430,000 cubic meters of concrete will be poured into its foundation which is enough to build two Kingdom Tower buildings like the one in Riyadh. The facility's location in Yanbu, next to two other refineries, is ideal for supplying both overseas markets and the Kingdom's fast-growing Western region.
"The various world-class local and international refining and petrochemical investments Saudi Aramco is making is proof of our firm belief that the downstream remains an attractive and profitable business," said Al-Falih. "Over the next decade, our total global refining capacity is expected to approach 8 million barrels a day as a result of this largest expansion by any oil company in the world." Saudi Arabia continues to remain a fantastic destination for foreign investment. "YASREF stands as a testament to the sound climate for foreign direct investment in Saudi Arabia, and it is yet another indicator of the attractive business opportunities this nation has to offer strategic investors," he said.
As Al-Falih pointed out, the latest joint endeavor is simply the most recent chapter in a long story of cooperation, collaboration and trade between the Arabian Peninsula and China.
"For many centuries, trade routes have linked these two poles of Asia, through an exchange of not only goods, but also of ideas, knowledge and culture, which led and continues to lead to greater prosperity for both of our civilizations," said Al-Falih.
Fu expressed delight at the agreement. "This is a milestone on the journey of cooperation between our two companies," he said. "We trace our relationship back to the early 1990s when we started downstream venture discussions in China; since then Sinopec and Saudi Aramco have developed cross-border cooperation along the hydrocarbon value chain, covering upstream and downstream investment, crude oil trading and engineering services."
Fu admitted that the path to cooperation was full of challenges in the initial stages.
"In the beginning we found that we are very different - we speak Chinese, and our friends in Saudi Aramco speak Arabic, both languages being the most difficult to learn; we write from left to right, our friends the opposite," he said. "But over time we found a lot of commonalities; we soon realized that our core values are the same."
With a 37.5 percent stake in YASREF, this is the largest Chinese investment in the Kingdom. China now stands as the Kingdom's largest crude oil market, making Saudi Arabia China's primary supplier of petroleum. "I look forward to the day when we meet again in 2014 to formally inaugurate this landmark project," said Al-Falih in his closing statement.
Copyright 2012 Arab News - Saudi Research & Publishing Co. Syndigate.info, Al bawaba.com. All Rights Reserved.
(Originally published January 15, 2012, in Arab News.)