Saudi Arabia is working to ensure energy security in response to the announcement that it will cut oil production. This reduction will take place from November 2022, at a rate of two million barrels per day.
A Saudi-Sino cooperation
Saudi Arabia and China recognize the importance of reliable oil supplies in a context of geopolitical tensions. Opec+ wants to reassure after the announcement of its production cut. The Saudi kingdom provides China with the bulk of its crude oil, which is specially processed in its refineries.
Saudi Arabia delivered 1.76 million barrels per day between January and August. The goal was to increase the market share to 1.77% from 16.8% the previous year. Nevertheless, the number of barrels has fallen by 0.3% annually according to Chinese statistical data.
Saudi Energy Minister Prince Abdulaziz bin Salman and China’s energy policy administrator Zhang Jianhua say:
“The Kingdom continues to be China’s most reliable partner and crude supplier. We are committed to working together to ensure the stability of the international oil market. We will continue to develop enhanced communication and cooperation to address emerging risks and new challenges.”
Saudi and Chinese energy counterparts are also continuing discussions on the development of petrochemical units and refineries. In addition, they plan to collaborate on the peaceful use of nuclear power and the development of renewable energy.
Aramco’s investments in China
Aramco is showing interest in the downstream oil sector in China. The group is seeking to secure the supply of its crude to the vast Asian market. The director of the firm, Amin Nasser announces that Aramco is studying some opportunities with the Chinese oil group Sinopec.
Aramco is pursuing its 300,000 barrels per day production project in northeast China. The company announces its decision to invest in a liquid conversion plant for the chemical industry. The joint venture will bring together North Huajin Chemical Industries Group Corp and Panjin Xincheng Industrial Group.
The plant, located in Panjin, will combine a refinery with a capacity of 300 barrels of oil per day and an ethylene cracker. Thus, Aramco will be able to supply 210,000 barrels of crude per day. In addition, Sinopec plans to add a petrochemical plant to its 28 refinery. 000 barrels per day from Fujian.
A contested OPEC+ decision
Saudi Arabia is facing a tense oil market. It is the subject of criticism from the United States and the major producers when it announces the reduction of its production. Indeed, the White House accuses the Saudi kingdom in particular of making this reduction for political purposes.
The International Energy Agency, supported by the United States, says Saudi Arabia’s strategy will worsen the global energy crisis. The IEA also states that this decision limits oil stockpiling for the first half of 2023. The agency estimates that global oil demand will reach 100.58 million barrels per day in the fourth quarter.
In the third quarter, demand was 99.6 million barrels per day. The IEA estimates in a report that OPEC+ plans will disrupt the oil supply growth curve. On the other hand, higher market prices increase fluctuations and energy security problems.
