Though the world keeps researching new technology to ease the reliance on fossil fuel, as for now the world economy is still pretty much fueled by petroleum. As the black gold remains the top export commodity from many Arab states, and China's Belt and Road Initiative covers many major oil-producing countries in the Arab world, oil is a natural focal point for cooperation between China and the region.
China overtook the United States as the top crude oil importer in 2017 at 420 million tons. Even though Russia overtook Saudi Arabia as China’s largest crude supplier in the same year, Arab states such as Saudi Arabia, Iraq, and Oman still count among China’s top 10 crude oil sources.
However, as the world oil price is at its low point and the oil-producing countries in the Arab world are trying to shake their dependence on crude oil export, the way that China and Arab states cooperate in the petroleum sector is transforming.
In 2015, Yanbu Aramco Sinopec Refining Company, or YASREF, opened for business in Yanbu, a major port on Saudi Arabia’s Red Sea coast, 160 km west of the Islamic holy city of Medinah. The refinery is a joint venture between China’s Sinopec, one of world’s largest oil refining companies, and Saudi Aramco, which own’s the world’s second-largest crude oil reserves. The refinery is one of the largest in the region with a daily crude oil processing capacity of 400,000 barrels.
"YASREF is Sinopec's first overseas joint venture in oil refineries,” said Li Xiong, a board director of YASREF and Sinopec’s shareholder representative to YASREF. “It is a major move for Sinopec to go overseas. For Saudi Aramco, it is also an essential part of Saudi Arabia's national industrialization plan. This is a strategic project for China's oil refining and petrochem service industry to explore the overseas market, as well as for Saudi Arabia to realize economic transformation."
Investment goes both ways. Aramco also has refining operations in China's Fujian and Yunnan provinces, and according to Reuters, negotiations for a third refinery in China are also underway.
Increased mutual investment is one way China and the Arab states can become more diversified in oil markets, upgrading Arab states from crude oil exporters to petrochem products producers, fueling the momentum for both sides to further explore the global market.
Zhang Jianping of the Chinese Academy of International Trade and Economic Cooperation said, "China's oil and gas cooperation with Arab countries is becoming more diversified. So both sides can explore market potential in global scope."
In recent years, Arab states in the Middle East such as Saudi Arabia and Qatar have proposed their sets of development plans called Vision 2030, eyeing to transform their economies to be less oil dependent and countries hub connecting Asia, Europe and Africa. The cooperation between China and the Arab states starts with oil. Now with China's Belt and Road Initiative and Vision 2030 already underway, more and more opportunities for both sides to cooperate are sure to arise.
“With China’s Belt and Road Initiative and Vision 2030 plans, there will be more opportunities for China’s petroleum companies to cooperate with corporates in the Arab world to explore the downstream market of the petroleum sector, such as petrochem, agriculture, even finance and tourism,” said Zhang.
(Top image: YASREF refinery in Yanbu Saudi Arabia. /Sinopec Photo)