Sinopec Corp of China, ExxonMobil Corp of the United States and Saudi Arabia’s Saudi Aramco formally forged an alliance for a mega-petrochemical expansion project and a fuel marketing scheme in Fujian Province to tap demand in southeastern China. The agreement has marked the first Sino-foreign venture with integrated businesses involving oil refining to chemical production and refined oil sales in China.
Sinopec and other partners have not disclosed investment data as of now. However, initially in 2005 when these three companies agreed to the deal with a price tag of $3.5 billion. According to the plans, the capacity of the Fujian project, located in Quanzhou City, will be increased to 240,000 barrels per day from 80,000. The unit will refine and process mainly sour Arabian crude oil.
As part of the project the three firms have plans to build a petrochemical complex to produce plastics and gasoline blending components, which will include an 800,000 tonne-per-year ethylene cracker.
In fact, China is pressing need of new refineries, as many of its existing plants operating at more than 90 percent capacity to meet growing demand for oil products. On the other hand, investment in new refining capacity has been constrained by government caps on retail prices of oil products and this left the refining businesses of Sinopec and PetroChina operating at a loss in recent years.
Under the arrangements of the seal, Sinopec will own a controlling 50 percent of the refining joint venture, while Exxon Mobil and Saudi Aramco will hold 25 percent each. In the meanwhile in a separate contract by Sinopec, Exxon and Saudi Aramco - for a retail joint venture to manage and operate around 750 filling stations and a network of terminals in Fujian.
