Saudi Aramco is suspending its investment in a joint venture developing a US$10-billion refinery and petrochemicals complex in China amid capex cuts, according to a Bloomberg report.
The Chinese will continue with the project, while the joint venture — in which Saudi Aramco owns 35% — remains an option for the future, Bloomberg sources claim.
In February 2019, Saudi Aramco signed an agreement to form the largest Chinese-foreign joint venture with NORINCO and Panjin Sincen to develop a fully integrated refining and petrochemical complex in China. The US$10-billion complex will have a 300,000 barrels per day refinery with 1.5 million metric tons per annum ethylene cracker and a 1.3 metric tons per annum paraxylene unit.
Under the terms of the deal, Saudi Aramco was supposed to supply up to 70% of the crude feedstock for the complex, which was expected to start operations in 2024.
Last year, Saudi Aramco signed several such deals in order to lock in future demand for the Kingdom’s oil.
However, this year the crash in oil prices and demand due to the pandemic has disrupted all the plans of oil majors, including those of Saudi Aramco, whose profits and cash flows have fallen as prices collapsed.
Aramco recalibrated capex and streamlined activities in the second quarter, as it announced a profit plunge. Nevertheless, the oil company committed to stick to its plan to pay US$ 18.75 billion in dividends for the second quarter despite a severe hit to its earnings.