China, Saudi Arabia consolidate energy ties amid uncertainty over Russian supplies

A landmark US$10 billion deal for a new refining complex in Liaoning province will help China to shore up its long-term energy security, analysts say

It’s a ‘win-win’ for Riyadh as well, thanks to the billions of dollars in Saudi crude oil the deal ‘locked-in’ that might otherwise have come from Russia

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Chinese President Xi Jinping goes to shake hands with Crown Prince Mohammed bin Salman, Saudi Arabia’s de facto ruler, upon arrival in Riyadh in December. Photo: Saudi Press Agency via AP

Published: 1:36pm, 28 Mar 2023Updated: 1:44pm, 28 Mar 2023

China and Saudi Arabia appear to be building a “more meaningful” relationship with their landmark US$10 billion deal to construct a state-of-the-art refining complex in northeastern Liaoning province, analysts say, as the interests of the world’s largest energy consumer and its biggest oil exporter converge.

Riyadh’s investment in the integrated refinery and petrochemicals complex in Panjin, unveiled on Sunday, “is another way of saying: I’m committed to what you are doing, I will help you out and make this relationship more meaningful,” said Ashok Dutta, an oil industry executive based in Calgary, the heart of Canada’s energy industry.

Sunday’s announcement by Saudi Aramco, which is primarily state-owned, came mere months after Chinese President Xi Jinping in December visited Saudi Arabia, where he held a summit with Gulf Arab leaders and signed a raft of energy and investment deals.

Work on the Panjin project is expected to start within three months, with Aramco securing a deal to supply more than two-thirds of the 300,000 barrels per day of crude oil that the complex will require as feedstock once complete – business that could otherwise have gone to Russia, the main competitor of Gulf energy exporters.

Engineers at work in a Saudi Aramco facility in eastern Saudi Arabia. The Panjin complex could import an estimated US$160 billion worth of Saudi crude over its lifespan. Photo: Saudi Aramco Handout via AFP

Such processing plants typically have a lifespan of around 35 years, which “guarantees that China will be a stable and continuous export market” for Saudi oil in the near future, said an energy sector researcher based in China who asked not be named because he wasn’t authorised to speak to the media. It will also help to shore up China’s energy security, he said.