Aramco signs oil refinery JV agreement with Sinopec

Saudi Arabian Oil company (Saudi Aramco) has entered into a $8.5bn joint venture (JV) agreement with China Petrochemical (Sinopec Group) to build an oil refinery at the Saudi Red Sea port of Yanbu.

Sinopec Group will hold a 37.5% stake in the project, known as Yanbu Aramco Sinopec Refining or Yasref, while Saudi Aramco will hold 62.5%. The oil refinery is expected to begin production in the second half of 2014 and process 400,000 barrels of heavy crude oil a day.

ConocoPhillips (COP) pulled out of the Yanbu project more than a year back in order to focus more on oil and gas exploration and to cut down on its refining activities. In 2011, Aramco entered into an initial agreement with PetroChina (PTR), a unit of China National Petroleum, to supply crude oil to a new refinery in south-west China.

Saudi Aramco is planning to increase its refining capacity to eight million barrels a day in the next decade through expansion. Chief executive Khalid al-Falih said Aramco and Sinopec may decide to use borrowing to fund the refinery project, in which case total costs could rise to $10bn.

Sinopec is engaged in oil and gas exploration and production, extraction, pipeline transmission and marketing; oil refining; production, marketing, storage and transportation of petrochemicals, chemical fibres, chemical fertilisers and other chemical products businesses.

Sinopec produces and supplies refined oil products including gasoline, diesel and jet fuel, and petrochemical products including synthetic resin, synthetic fibre monomers and polymers, synthetic fiber, synthetic rubber, chemical fertiliser and petrochemical intermediates.