China, Saudi Arabia photo:VCG

China’s leading private refiner Rongsheng Petrochemical and Saudi Aramco on Tuesday signed a Memorandum of Understanding to address buying stake in each other’s units, a move indicating that China-Saudi Arabia energy cooperation is becoming closer. 

According to an announcement by the Chinese company, Rongsheng is expected to buy a 50 percent stake in the Saudi company's refining unit SASREF, and it plans to expand the Saudi refinery while improve product quality.

At the same time, the two companies are in talks to sell Aramco an up to 50-percent stake in its unit Ningbo Zhongjin Petrochemical Co.

If the SASREF stake acquisition materializes, it would be the first investment by a private Chinese firm in a significant Saudi refining asset. State-owned refining giant Sinopec Corp is so far the only Chinese company that owns a stake in Saudi Arabia, according to media reports.

The final investment decisions of Rongsheng and Saudi Aramco will be made after both companies have completed their due diligence on Ningbo Zhongjin and SASREF, read the announcement.

The two companies have established a close relationship that goes beyond the purchase and sale of crude oil last year. In 2023, Saudi Aramco, through its wholly-owned subsidiary, acquired a 10-percent stake in Rongsheng for 24.6 billion yuan ($3.4 billion), and the two have cooperated in feedstock, technology, and chemical sales through a series of commercial cooperation agreements, including a 20-year crude oil supply deal.

The deal marks growing cooperation between China and the Middle East. China has maintained its position as the Middle East's top trading partner for many years. 

Over the past decade, China's direct investment in the Middle East has exceeded $20 billion. In 2022, the trade volume between China and the Middle East exceeds $500 billion.

In addition to energy cooperation, the Middle East fund managers are showing their growing appetite for Chinese assets this year, increasing holdings in Chinese A-share stocks, adding strategic investment in Chinese companies, and expanding presence by setting up new branch offices in China.

As one of the latest examples, the Saudi Public Investment Fund, one of the world's largest sovereign wealth funds managing nearly $700 billion, has announced plans to set up an office in the Chinese mainland, according to media reports, citing the fund's governor Yasir Al-Rumayyan.

Global Times