Rising Russian and U.S. competition has pushed Saudi Aramco to find new buyers f...
DUBAI/SINGAPORE/BEIJING - Rising Russian and U.S. competition has pushed Saudi Aramco to find new buyers for its oil in China, encouraging a shift toward independent refiners and newcomers to the business.
But the change in tack may not offer the same returns. Aramco’s new partners lack the scale and marketing reach of PetroChina and Sinopec Corp, the state-run firms that dominate China’s refining, petrochemical and retail fuel business, analysts say. In February, it agreed to form a venture with Chinese defense conglomerate Norinco to develop a $10 billion refining and petrochemicals complex in the city of Panjin, in the northeast province of Liaoning.
“The private players are more open and entrepreneurial. They also need the oil and the experience,” said one source familiar with the recent deals in China.The strategy has helped put Saudi Arabia on track to lift oil exports to China to 1.5 million bpd in the first quarter, catching up with Russia which has been China’s No. 1 supplier for three years in a row.
Aramco signed a memorandum of understanding in 2011 with PetroChina to supply oil to the Yunnan plant. But talks on the deal hit a roadblock in mid-2018, the sources said. “Independents have a smaller footprint across the value chain and less experience in trading,” said Michal Meidan of Energy Aspects. “The challenge of partnering with independents is precisely the limits of access to the retail market.”Sinopec and PetroChina control about two-thirds of retail sales in China, while independents together have about a quarter, industry experts say.
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