The Clap
Saudi Aramco (2222) revealed its interest in acquiring a 10% stake in the Chinese company Hengli Petrochemical, a move that would strengthen the global oil giant’s presence in China.
Discussions
Saudi Aramco, a global leader in energy and chemicals, is in talks with the parent company Hengli Group Limited.
A “memorandum of understanding” has been signed regarding the proposed deal, which aligns with Aramco’s strategy to enhance its footprint in the refining, chemicals, and marketing sectors in high-value markets.
This includes expanding its liquid-to-chemicals program and securing “long-term agreements” for crude oil supplies.
So What
The market value of the 10% stake in Hengli Petrochemical is $1.5 billion based on its current share price.
It owns and operates a refinery with a capacity of 400,000 barrels per day, and an integrated chemical complex in Liaoning Province, China.
It also has several production plants and facilities in Jiangsu and Guangdong provinces.
It is worth noting that Aramco recently announced additional investment opportunities with the Chinese Dragon, aiming to build a globally leading chemical sector.
Some Context
The “potential acquisition” is part of a series of deals between the “world’s largest oil-producing company” and Chinese refining companies:
– Two Chinese private-sector-owned companies, Rongsheng Petrochemicals and Aramco, announced in January that they are in talks to exchange ownership stakes of 50% in their refineries in China and Saudi Arabia.
– Aramco completed a $3.4 billion deal in July to acquire a 10% stake in Rongsheng, linked to a 20-year crude oil supply agreement to Zhejiang Petrochemical, a subsidiary of Rongsheng.
– Aramco is in discussions to purchase a 10% stake in Shandong Yulong, a Chinese petrochemical company.
– Aramco seeks to be a “strategic investor” in another Chinese private refinery, Jiangsu Shenghong.
– Sabic, a subsidiary of Aramco, is building a petrochemical complex in Fujian province in southeast China, costing approximately $6.4 billion, as part of a joint project with Fujian Fuhua Petrochemicals, a state-owned Asian company.
