CHINA Petrochemical Corporation (Sinopec Group) and Saudi Aramco have signed a joint venture agreement related to the ongoing development of Yanbu Aramco Sinopec Refining Company (Yasref) Limited, formerly the Red Sea Refining Company.

The agreement brings together two world-class companies that will complete construction and operate a highly competitive full-conversion refinery in Yanbu, on the west coast of the Kingdom of Saudi Arabia.

The agreement was signed by Fu Chengyu, chairman, Sinopec Group and Khalid Al Falih, president and CEO, Saudi Aramco.

The joint venture agreement follows a memorandum of understanding (MoU) between Saudi Aramco and Sinopec in March 2011, and following the JV agreement, Sinopec will hold equity interest of 37.5 per cent in Yasref, with Saudi Aramco holding the remaining 62.5 per cent.

The Yasref joint venture marks another significant phase of several progressing partnerships between Saudi Aramco and Sinopec across the hydrocarbon value chain in Saudi Arabia and in China. Saudi Aramco and Sinopec both bring significant knowledge and expertise to the joint venture, which represents the strengthening of their strategic partnership to enhance the trade of transportation fuels between a significant energy producer and a significant consumer. In-kingdom refineries, such as the one being built by Yasref, possess the location advantage to supply domestic and international markets, to the east and west.

Fu Chengyu says: “Sinopec and Saudi Aramco have enjoyed substantial cooperation in the fields of gas exploration, oil refining, oil trade, and engineering services. The implementation of this project will usher in a new chapter for Sinopec’s investment in refinery and petrochemical projects in Saudi Arabia. It will also help to extend the strategic cooperation of the two companies in the petroleum and petrochemical value chain, and further strengthen the complementary strategic partnership of the two parties. Sinopec is very pleased to contribute to the already solid economic ties between China and Saudi Arabia, whilst furthering our commitment to social responsibility and the pursuit of green, low-carbon development.”

Al Falih says: “Our mutually progressing partnership with Sinopec has continued to flourish across the hydrocarbon value chain from crude oil supply to refining and petrochemicals in Fujian to Yasref, is a testimony of our continued efforts to enhance collaboration between the two companies. Yasref, being Sinopec’s first international downstream investment, will definitely strengthen further the longstanding bond between the two companies, and I am confident it will also yield mutual benefits for the kingdom and the People’s Republic of China.

“Yasref is uniquely placed to seize market opportunities, and it demonstrates our unwavering commitment to significantly grow our downstream portfolio, and in creating win-win partnerships for us and our stakeholders. Among Yasref’s many contributions will be to provide training, employment and industrial and economic development opportunities for Saudi nationals and for the growth of local enterprises.”

Sinopec has partnered with Saudi Aramco along with ExxonMobil in the Fujian Refining and Petrochemical Company Limited, and Sinopec SenMei (Fujian) Petroleum Company Limited in China’s Fujian Province, as well as with Sino Saudi Gas Limited, a gas exploration company in Saudi Arabia. Sinopec, the biggest Asian-owned refiner operating in Asia, is also Saudi Aramco’s largest crude oil buyer.

The Yasref project involves construction of a new “grassroots” refinery on the Yanbu site covering over 5.2 million sq m. With construction well under way, the project is on schedule with 10 per cent of construction completed.

The Yasref refinery is scheduled to be operational in the second half of 2014. The refinery will process 400,000 barrels per day (bpd) of Arabian Heavy crude oil and will produce high-quality transportation fuels that meet the most stringent refined product specifications for domestic and international markets. The refinery is set to have the capacity to produce 90,000 bpd of gasoline, 263,000 bpd of ultra-low-sulfur diesel, along with by-products consisting of 6,200 metric tonnes per day of petroleum coke and 1,200 metric tonnes per day of sulphur.

Saudi Aramco’s extensive and integrated hydrocarbon facilities in Yanbu will be utilised to supply crude oil feedstock to Yasref and to export transportation fuels. The refinery project includes mega-processing units, utilities and interconnecting piping, associated crude oil and refined product storage, as well as the offsite facilities necessary to support the safe and efficient operation of the refinery.

Yasref will also provide a platform for increased industrial development in the Yanbu area supporting the expansion of the domestic economy and providing job opportunities for Saudi nationals, as well as local enterprises. It is estimated that the refinery will create 1,200 direct and 5,000 indirect employment opportunities.