(Yicai) Sept. 28 -- Saudi Aramco plans to invest in a subsidiary of Jiangsu Eastern Shenghong, a Chinese supplier of petrochemical and chemical fiber products.

The Saudi petrochemicals giant will but 10 percent of Jiangsu Shenghong Petrochemical Industry Group and cooperate on crude oil procurement, sales of chemical and fuel products, and the licensing of high value-added technologies, the pair said yesterday, without revealing the size of the investment.

Shenghong Petrochemical is China’s largest producer of acrylonitrile, the main raw material for chemical fiber acrylic, according to the Lianyungang-based company’s website. It has the capacity to make 780,000 tons of the product a year.

The unit owns and runs a 320-million-barrels-a-day integrated refinery and petrochemical complex, a methanol-to-olefins and derivatives complex, and a purified terephthalic acid production facility in the Xuwei Petrochemical Industrial Park in Jiangsu province, Saudi Aramco noted.

Saudi Aramco would supply Shenghong Petrochemical with crude oil and potentially other feedstocks, the Dhahran-based company added. The two also intend to cooperate on developing a large expansion project, subject to further discussions between the parties and the execution of definitive agreements.

The pair would conduct due diligence, audits, and evaluation work for the target company as soon as possible, Suzhou-based Eastern Shenghong said.

“Saudi Aramco looks forward to partnering with Eastern Shenghong to supply the reliable energy required for China’s long-term growth, development, and energy security,” said Mohammed Y. Al Qahtani, president of Saudi Aramco. 

‘Decades to Come’

“The signing of this cooperation framework agreement is another significant milestone in Saudi Aramco’s downstream strategy to increase conversion of Arabian crude oil to chemicals and to expand into the critically important Chinese market,” he said. “We see China as an important partner not only today but for decades to come.”

Saudi Aramco has been actively investing in China’s petrochemical industry in recent years. In March, it set out a plan to spend CNY24.6 billion (USD3.4 billion) to acquire 10 percent of Rongsheng Petrochemical, another private petrochemical firm, and supply crude oil to its unit Zhejiang Petrochemical over the next 20 years.

Saudi Aramco has also teamed up with several Chinese partners, planning to invest in the construction of a large integrated refining and chemical production base in Panjin in China’s northeastern Liaoning province.

In two other announcements yesterday, Eastern Shenghong said that prior to the Saudi investment, its actual controllers Miao Hangen and his wife intend to inject the petrochemical port business in the Xuwei Petrochemical Industrial Park, as well as real estate development and property service assets at the park, into Shenghong Petrochemical for a cash consideration of CNY2.2 billion (USD300.9 million).

Shares of Eastern Shenghong [SHE: 000301] ended 0.2 percent down at CNY11.55 (USD1.58) apiece in Shenzhen today. The stock is down by 11.4 percent since the end of last year.

Editor: Futura Costaglione