KHOBAR, Saudi Arabia, (Reuters) – State oil giant Saudi Aramco will sign a final deal next week to build a new 400,000 barrels per day (bpd) oil refinery in Yanbu with China’s Sinopec Group, the company said on Sunday.
Aramco said the formal signing would take place on Jan. 14 in Dhahran, the site of the state company’s headquarters.
Industry sources had expected the two oil majors to finalise their 2011 initial agreement in November last year.
Under the initial agreement, Aramco will hold a 62.5 percent stake in the joint venture formed to develop the project–now rebranded as Yanbu Aramco Sinopec Refining Co (YASREF)– while Sinopec will own the rest.
For Sinopec, the venture would be the first refining project the Chinese state-run oil major, parent of top Asian refiner Sinopec Corp , builds outside China, putting it in a race against rival PetroChina which has snatched a string of refinery deals beyond Chinese borders.
Construction of the refinery, located on the Red Sea, is now underway and was to have been carried out by U.S. oil firm ConocoPhillips and Aramco. But Conoco pulled out of the plans in April 2010 as it shifted away from the refining business to focus on oil and gas exploration.
Aramco has said it will push on with the project even after the withdrawal of Conoco as it is part of its drive to boost domestic refining capacity to 3.5 million bpd in 2016. In July 2010, Aramco awarded deals to build the plant seen complete in 2014.
The refinery is slated to process heavy crude from Saudi Arabia’s Manifa oilfield, which is currently under development to reach an output of 900,000 bpd by 2014.
Aramco has already partnered with Sinopec at the joint venture Fujian plant in southeast China. It is considering building three new joint venture refineries in Asia, Aramco’s largest and fastest growing oil market as part of plans to boost its global refining capacity by 50 percent to over 6 million bpd.