[ZeroHedge] - Multi-pronged memorandum of understanding between Aramco and Sinopec lays the basis for increased cooperation.
- China uses Russia’s new leverage over Saudi Arabia and OPEC to deploy its own strategy to accrete and exploit power over the Middle East’s huge oil and gas reserves.
- The MoU covers refining, up-and-downstream operations, oilfield services, hydrogen, carbon capture processes and more
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The signing last week of a multi-pronged memorandum of understanding (MoU) between the Saudi Arabian Oil Company – formerly the Arabian American Oil Company - (Aramco) and the China Petroleum & Chemical Corporation (Sinopec) is a critical step in China’s ongoing strategy to secure Saudi Arabia as a client state. As the president of Sinopec, Yu Baocai, himself put it:
“The signing of the MoU introduces a new chapter of our partnership in the Kingdom…The two companies will join hands in renewing the vitality and scoring new progress of the Belt and Road Initiative [BRI] and [Saudi Arabia’s] Vision 2030.”
The scale and scope of the MoU is enormous, covering deep and broad co-operation in refining and petrochemical integration, engineering, procurement and construction, oilfield services, upstream and downstream technologies, carbon capture and hydrogen processes. Crucially for China’s long-term plans in Saudi Arabia, it also covers opportunities for the construction of a huge manufacturing hub in King Salman Energy Park that will involve the ongoing, on-the-ground presence on Saudi Arabian soil of significant numbers of Chinese personnel: not just those directly related to the oil, gas, petrochemicals, and other hydrocarbons activities, but also a small army of security personnel to ensure the safety of China’s investments.
These developments are all in line with a comment made last March, at the annual China Development Forum hosted in Beijing, by Aramco chief executive officer, Amin Nasser:
“Ensuring the continuing security of China’s energy needs remains our highest priority - not just for the next five years but for the next 50 and beyond.”
At that point in early 2021, Aramco had a 25 percent stake in the 280,000 barrels per day (bpd) Fujian refinery in south China through a joint venture with Sinopec (and the U.S.’s ExxonMobil) and had also earlier agreed (in 2018) to buy a 9 percent stake in China’s 800,000 bpd ZPC refinery from Rongsheng. Several other joint projects between China and Saudi Arabia that had been agreed in principle were delayed due to a combination of the ongoing effects of Covid-19, Aramco’s crushing dividend repayment schedule, and concern from both countries – especially China – on how Washington might react to this clear threat to the U.S.’s own long-running interests in, and geopolitical relationship with, Saudi Arabia.
The basis of this enduring relationship between the U.S. and Saudi Arabia, as analysed in depth in my new book on the global oil markets, had been struck back in 1945 at a meeting on 14 February 1945 between the then-U.S. President Franklin D. Roosevelt and the Saudi King at the time, Abdulaziz. The first face-to-face contact between the two, this landmark meeting was held on board the U.S. Navy cruiser Quincy in the Great Bitter Lake segment of the Suez Canal, and the deal that they agreed – which had been the basis for all of the U.S.’s Middle East policy up until very recently - was this: the U.S. would receive all of the oil supplies it needed for as long as Saudi had oil in place, in return for which the US would guarantee the security both of the ruling House of Saud and, by extension, of Saudi Arabia.
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