Saudi Arabian Oil Co (Aramco) has suspended a $10-billion deal signed with China North Industries Group Corp (Norinco) and Panjin Sincen to build a refining and petrochemical complex in Liaoning province, China, Bloomberg reported, citing sources familiar with the matter. According to the report, the suspension is part of Aramco’s push to reduce its spending amid the uncertain market outlook caused by the COVID-19 pandemic.
The joint venture was signed during the Crown Prince Mohammed bin Salman’s visit to Beijing in February 2019. At the time, Saudi Arabia is looking to expand its market share in Asia. Under the deal, Aramco, Norinco, and Panjin Sincen are set to team up and form a joint venture named Huajin Aramco Petrochemical Co. Saudi crudes are slated to make up 70% of the feedstock for the project, which includes a 300,000-bpd refinery, an ethylene cracker, and a paraxylene unit.
The health crisis has impacted energy prices and the calculations for energy companies’ projects across the globe. Aramco has announced it will cut its spending as it attempts to maintain a dividend payment of $75 billion amid low oil prices and growing debt load. The kingdom of Saudi Arabia, a major recipient of the dividends, has its public finances squeezed as the pandemic hurts its oil revenue.
Earlier this year, a negotiation between Aramco and Indonesia’s state energy company Pertamina on a refinery expansion project ended without agreement, with Pertamina seeking for another partner. Industry sources also said there’s a rumour that the oil giant may pull out of Malaysia’s PETRONAS Refinery and Petrochemical Integrated Development (RAPID) project.
