Saudi Aramco Completes Investment in Rongsheng Petrochemical, Leading to Change in Company Type

On July 31st, Rongsheng Petrochemical held its 6th board of directors’ 9th meeting, where they approved the proposal to change the company’s type. The proposal still needs to be submitted for approval at the company’s second extraordinary shareholders’ meeting scheduled for August 17, 2023, at 14:30.

According to the announcement, Rongsheng’s controlling shareholder, Zhejiang Rongsheng Holding Group Co., Ltd., signed a Share Purchase Agreement with Aramco Overseas Company B.V. (AOC), a wholly-owned subsidiary of Saudi Arabian Oil Company, on March 27, 2023. The transfer of shares was completed on July 20, 2023, and the total transferred shares amounted to 1,012,552,501.

Due to AOC being registered in the Netherlands and being a foreign shareholder of the company, in accordance with relevant laws and regulations such as the Foreign Investment Law of the People’s Republic of China, the company’s type will be changed from “Other Joint Stock Limited Companies (Listed)” to “Joint Stock Limited Companies (Foreign Investment, Listed),” subject to approval from the relevant authorities. To ensure the lawful and efficient completion of the company’s changes, the board of directors proposes to authorize the chairman and/or individuals authorized by the chairman to handle all matters related to the company’s business registration changes, and comply with foreign investment information reporting requirements.

On July 21, Rongsheng Petrochemical, with the largest single integrated refining and chemical base globally, made further progress in its strategic cooperation with the world-leading integrated energy and chemicals company, Saudi Aramco. The strategic investment has been officially completed.

Based on the comprehensive strategic cooperation agreement signed by the two parties on March 27, Saudi Aramco, through its wholly-owned subsidiary, acquired a 10% stake in Rongsheng Petrochemical for CNY 24.6 billion (approximately USD 3.4 billion) in cash. The completion of this transaction is a milestone achievement for both parties.

Rongsheng Petrochemical’s Chairman, Li Shuirong, stated, “The completion of this transaction marks the beginning of a new era of collaboration between Rongsheng and Aramco and signifies a significant step in Rongsheng’s internationalization strategy.”

Mohammed Y. Al Qahtani, the Executive Vice President of Downstream at Saudi Aramco, said, “Our strategic partnership with Rongsheng Petrochemical drives Saudi Aramco’s crude-to-chemicals strategy while expanding the company’s presence in China.”

Both companies operate in complementary sectors, and they plan to conduct comprehensive negotiations and collaborations, including:

1. Sharing cutting-edge technologies: Utilizing their strengths to complement each other’s technologies, jointly developing new technologies, processes, and equipment to meet future market demands, and promoting them to the market while sharing necessary research and development resources.

2. Stable crude oil supply: Saudi Aramco will supply Zhejiang Petrochemical with no less than 480,000 barrels/day of high-quality crude oil and provide the company with production raw materials such as naphtha, mixed xylene, and straight-run fuel oil.

3. Interest-free procurement credit line: A credit line of USD 800 million over 20 years, with the possibility of increasing the credit line during the cooperation period. This will help improve Zhejiang Petrochemical’s fund utilization efficiency and positively impact its profitability.

4. Flexible crude oil storage collaboration: The company will provide Saudi Aramco with crude oil tanks and related facilities in Zhoushan City. Saudi Aramco will maintain crude oil inventories of no less than 1.5 million metric tons, which will help ensure a stable supply of crude oil to Zhejiang Petrochemical.

5. Broad global sales channels: Leveraging Saudi Aramco’s overseas sales channels, the company can further expand international market space for its products and deepen strategic cooperation with overseas customers. Similarly, using the company’s resources cultivated over the years, Saudi Aramco can quickly enter relevant international and domestic markets.

Saudi Aramco has already invested over CNY 100 billion in China in the first half of this year. Some of their recent collaborations include:

1. Signing a shareholder agreement on March 26 with North Industries Group Corporation and Panjin Xincheng Industrial Group to jointly build a large-scale refining and chemical integrated joint facility in Northeast China with a total investment of about CNY 83.7 billion.

2. Signing a memorandum of cooperation with the Guangdong provincial government on March 26 to conduct collaborations in energy, finance, research and innovation, industrial projects, and talent exchange.

3. Signing an agreement with Rongsheng Petrochemical on March 27 to acquire a 10% stake through its subsidiary for CNY 24.6 billion at an 88% premium over the closing price of the day.

On July 21, Saudi Aramco’s investment in Rongsheng Petrochemical was officially completed.

On December 9, 2022, Saudi Aramco signed a cooperation framework agreement with Sinopec Group and SABIC for the Fujian Gulei Phase II project. The project plans to build a 16-million-ton/year refining, 1.5-million-ton/year ethylene cracking, and downstream derivatives integrated facility in Fujian, expected to be completed and put into operation by the end of 2025.

Additionally, Sinopec and Saudi Aramco signed a memorandum of cooperation with Yanbu Aramco Sinopec Refining Company to jointly develop a large-scale project to convert liquid raw materials into chemical products. This project will be optimally coordinated with Yanbu Refinery.

Saudi Aramco and AOC

Saudi Aramco is a comprehensive international petroleum group with a history of many years and is one of the largest integrated energy and chemical companies in the world. Its main business includes petroleum exploration, development, production, refining, transportation, and sales, among others. It went public on the Saudi Stock Exchange in 2019, with a market capitalization of approximately SAR 7.07 trillion (about USD 1.88 trillion) as of March 23, 2023. AOC is a wholly-owned subsidiary of Saudi Aramco.

Rongsheng Petrochemical is one of China’s leading petrochemical companies in terms of comprehensive strength. The company operates the world’s largest single integrated refinery, Zhejiang Petrochemical Co., Ltd., with a capacity of 40 million tons. It is an important manufacturer of polyester, new energy materials, engineering plastics, and high-value-added polyolefins in China and Asia. It has the world’s largest capacity for chemicals such as PTA and PX. The company also ranks among the top globally in the production capacity of polyethylene, polypropylene, PET, EVA, ABS, and other products. In 2022, Brand Finance, a well-known brand evaluation agency in the UK, ranked it 8th in the Chemicals 25 2022 report, listing the world’s most valuable 25 chemical brands.