Rongsheng and Saudi Aramco in Advanced Discussions for Reciprocal Unit Investments

Chinese privately-owned refiner Rongsheng Petrochemical is currently in discussions with Saudi Aramco regarding the potential acquisition of a 50% stake in SASREF, the refining division of the Saudi energy giant. This revelation surfaced in a filing made on Tuesday.

In addition to the potential stake acquisition, Rongsheng is also exploring the sale of up to a 50% stake in its own unit, Ningbo Zhongjin Petrochemical Co, to Saudi Aramco. The intricacies of these discussions were formalized in a memorandum of understanding signed by both companies on the same day.

SASREF, formally known as the Saudi Aramco Jubail Refinery Company, is strategically located in Jubail Industrial City and is dedicated to the processing of crude oil into various petroleum products. With a substantial production capacity of 305,000 barrels per day (bpd), SASREF plays a crucial role in Saudi Aramco's refining operations, as outlined on its official website.

If the potential acquisition of the SASREF stake progresses, it would mark a significant milestone as the first instance of a private Chinese company making a substantial investment in a noteworthy Saudi refining asset. Presently, the only Chinese entity with a refinery stake in Saudi Arabia is the state-owned refining giant, Sinopec Corp.

Beyond the stake-related discussions, both Rongsheng and Saudi Aramco are actively exploring opportunities for the expansion of the Saudi refinery and the diversification of its refined product portfolio. However, Rongsheng Petrochemical underscored that the final investment decision is contingent upon the successful completion of due diligence processes for both Ningbo Zhongjin and SASREF by the respective buyers.

In a noteworthy development from March, Aramco announced its agreement to acquire a 10% stake in Rongsheng. This strategic move was linked to a 20-year crude oil supply deal with Rongsheng-controlled Zhejiang Petrochemical Corp. The deal, valued at $3.4 billion, concluded successfully in July. Aramco has also been engaged in discussions to secure a 10% stake in Shandong Yulong Petrochemical Co. This company is currently in the process of constructing a refinery complex with the capacity to process 400,000 barrels of crude oil per day in Shandong province, China.

Expanding its footprint in the Chinese refining landscape, Aramco revealed plans in September to become a strategic investor in another private Chinese refiner, Jiangsu Shenghong Petrochemical. This particular company operates a substantial 320,000 bpd refinery and petrochemical complex in the eastern province of Jiangsu.

In a separate filing submitted to the stock exchange, Rongsheng unveiled its intention to inject an investment of 67.5 billion yuan ($9.46 billion) into new materials at its Zhoushan base in eastern China. The focus of this investment will encompass high-performing plastic materials such as ethylene vinyl acetate (EVA) and polyolefin elastomers. These materials hold widespread utility in the production of solar panels, aligning with the broader industry shift toward sustainable and renewable energy solutions.