24 August, 2020:
The Corona virus epidemic caused the collapse of oil prices, and a decline in energy demand, which resulted in a review of the feasibility of energy companies’ projects around the world.
To comply with market instability and low oil prices, the giant Saudi Aramco canceled a deal to build a $ 10 billion refining and petrochemical complex in China. According to Bloomberg, Aramco decided to stop investing in the facility located in the “Liaoning” region, northeast China.
Aramco plans to make deep cuts in its capital spending as it tries to maintain a dividend of $ 75 billion amid falling crude prices and rising debt. Saudi Arabia is currently suffering from great pressures on its public finances, due to the significant decline in oil prices, and also because of the decline in its financial resources from religious activities this year.
The joint refinery project between Saudi Arabia and China was agreed upon during the visit of Crown Prince Mohammed bin Salman to Beijing in February 2019. At that time, the project was seen as a historic deal with a major ally, and would bring Saudi Arabia to increase its share in the Asian market, and encourage attracting more Chinese investments to work in the kingdom. The Saudi-Chinese cooperation was to produce a joint entity called “Huajin Aramco Petrochemicals”, and the Kingdom would supply China with up to about 70% of the crude for the refinery, which has a capacity of 300 thousand barrels per day.
In general, refineries around the world have been subjected to difficulties after the spread of the Corona virus which reduced the demand for petroleum products worldwide, and consequently profit margins in the refining industry decreased, which led to a decline in investments in this vital sector.
It is worth noting that Saudi Aramco earlier this year also held talks with the Indonesian state energy company, “Pertamina”, regarding a refinery expansion project there, but the deal stalled and was not completed.