(EnergyAsia, March 30 2011, Wednesday) — Saudi Aramco and China Petrochemical Corporation (Sinopec) have signed a Memorandum of Understanding (MOU) to develop a 400,000 b/d full-conversion refinery in Yanbu city on the west coast of Saudi Arabia by 2014.

Saudi Aramco will have a 62.5% stake in the Red Sea Refining Company (RSRC) while Sinopec owns the remaining 37.5% according to the MOU signed by Khalid A. Al-Falih, Saudi Aramco’s President and CEO, and Su Shulin, Sinopec’s President.

The refinery will process Arabian Heavy crude oil and produce high-quality refined products meeting the most stringent specifications for domestic and global markets. The product slate includes 90,000 b/d of gasoline, 263,000 b/d of ultra-low sulphur diesel, 6,300 metric tons per day (MTD) of petcoke and 1,200 MTD of sulphur.

Sinopec replaces US oil company ConocoPhillips which pulled out of the Yanbu project last year to focus on upstream projects.

Saudi Aramco and Sinopec said they will bring commercial and technical knowledge and expertise to the joint venture while creating a strategic partnership to enhance trade of transportation fuels between a significant energy producer and a significant consumer.

Saudi Aramco said the project represents a continuation of its long-term strategy of making world-scale downstream investments following a “massive” upstream programme to increase its crude oil production capacity to 12 million b/d. RSRC is among a number of downstream projects that Saudi Aramco is demonstrating its commitment to meet future worldwide energy demand.

The two companies are already partners in various downstream projects in Saudi Arabia and China. They are partners with ExxonMobil in the Fujian Refining and Petrochemical Company Limited in Fujian Province and are jointly invested in the gas exploration company, Sino Saudi Gas Ltd. Sinopec is also a leading buyer of Saudi crude oil.

Mr Al-Falih said: “This agreement further strengthens our mutually beneficial partnership with Sinopec, and in addition it demonstrates our commitment and capability to add value to our expanding downstream business through a world-class partner, with a solid network of marketing and distribution capability needed to support the Red Sea Refining Company.”

Mr Su said: “Sinopec and Saudi Aramco have developed a strong and long-term relationship, and have built concrete cooperation in refining, petroleum trading, and engineering services. The Red Sea Refining Company will open a new chapter in which Sinopec consolidates the complementary strategic partnership with Saudi Aramco through the downstream investment in Saudi Arabia. The project is a further step by Sinopec to expand its international operation by developing its overseas refining and petrochemical business, and to sharpen its competitive edge. It will also help Sinopec gain access to more energy sources and secure China’s energy supply.”

The proposed refinery will use existing Saudi Aramco facilities to receive crude oil and export refined products. It will include refinery process units, utilities and interconnecting piping, associated feedstock and refined product storage, as well as offsite facilities necessary to support safe and efficient operations.