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Aramco to enter JV with China's Norinco during Arab royal's visit

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Saudi Aramco will sign a memorandum of understanding to build a refinery and petrochemical project in China's Liaoning province in a JV with China's defence conglomerate, Norinco.

Beijing

SAUDI Crown Prince Mohammed bin Salman arrived in Beijing Thursday as the monarch aims to seal partnerships on a high-profile Asia tour following a diplomatic crisis over a journalist's brutal murder.

He is expected to meet Chinese President Xi Jinping on his two-day trip to the Chinese capital following visits to Pakistan and India.

It is during this visit to China that Saudi Aramco will sign preliminary deals to invest in two oil refining and petrochemical complexes there, said sources familiar with the plans.

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Mr Xi has made stepping up China's presence in the Middle East a key foreign policy objective, despite its traditional low-key role there.

The tour through Asia has allowed the Crown Prince to show that Riyadh still has allies after the grisly murder of Saudi journalist Jamal Khashoggi at the Saudi consulate in Istanbul tarnished the image of the kingdom and the prince.

China has given few details about the royal's visit, but its foreign ministry said Beijing's ambitious Belt and Road global trade infrastructure initiative will be on the agenda, as the two countries look to improve their economic ties.

In Pakistan, the monarch had signed a raft of investment deals worth up to US$20 billion for the cash-strapped South Asian country; on Wednesday, the monarch met Indian Prime Minister Narendra Modi, whose country counts Saudi Arabia as one of its key crude suppliers.

Top executives from Saudi Aramco, the world's top oil exporter, are part of the Saudi delegation on the two-day visit to China.

Aramco will sign a memorandum of understanding (MOU) to build a refinery and petrochemical project in the north-eastern Chinese province of Liaoning, in a joint venture with China's defence conglomerate Norinco, said three sources with knowledge of the matter.

Aramco is also expected to formalise a plan to take a minority stake in Zhejiang Petrochemical, controlled by private Chinese chemical group Zhejiang Rongsheng Holding Group, said two sources. Zhejiang Petrochemical is building a refinery and petrochemical complex in the eastern Chinese province of Zhejiang.

The investments could help Saudi Arabia regain its place as the top oil exporter to China, which it has relinquished to Russia for the past three years. Saudi Aramco is poised to bolster its market share by signing supply agreements with non-state Chinese refiners.

It is not clear what new details will be in the MOU with Norinco expected during the visit, as the two companies first announced an alliance in May 2017 during Saudi ruler King Salman's visit to Beijing.

Under that earlier MOU, the companies agreed to build a refinery capable of processing 300,000 barrels per day of crude, and a facility that would make 1 million tonnes per year of ethylene, a building block for petrochemicals, at an estimated cost of more than US$10 billion.

A senior Aramco executive said last June that he expected the front-end engineering for the Norinco project to be finished by mid-2019, following which the company will take a final investment decision.

Norinco officials were not immediately available for a comment; Aramco officials did not reply to a request for comment sent by email.

All the sources requested anonymity because the matter is sensitive.

Meanwhile, the Zhejiang agreement would give Saudi Aramco control of a 9-per-cent stake in the project held by the Zhejiang provincial government.

China has to step carefully in its ties with Riyadh due to Beijing also having close ties with Saudi's regional foe, Iran. Earlier this week, Mr Xi told the speaker of Iran's parliament that China's desire for close ties with Iran will remain unchanged. AFP, REUTERS