An employee walks past crude oil storage tanks at the Juaymah Tank Farm in Saudi Aramco's Ras Tanura oil refinery and oil terminal in Ras Tanura, Saudi Arabia. Image Credit: Bloomberg

Dubai: State-run Saudi Aramco is on track to become the largest supplier of crude oil to China in 2019, having signed five deals that together make up China’s largest crude oil purchase.

Aramco said on Wednesday that the five crude oil supply agreements (COSAs) with Chinese companies will help raise its crude supplies to the world’s biggest oil importer to 1.67 million barrels per day (mbpd) next year.

1.67mbpd

Saudi crude oil deliveries to China set in 2019

Analysts have described the deals as a boon for Saudi Arabia, which has managed to dislodge Russia as China’s top crude oil supplier.

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“It sounds like a major win for the kingdom, possibly raising its exports to China to the highest ever,” Vandada Hari, founder and CEO of Singapore-based Vanda Insights, which analyses energy markets, told Gulf News.

China imports an average of 8.4 million bpd, followed by the United States at 7.9 million bpd and India with 4.93 million bpd.

The Asian powerhouse bought $162.2 billion (Dh595.6 billion) worth of crude oil in 2017, 18.6 per cent of total crude oil imports worldwide.

Russia supply

Prior to this, China had begun sourcing more supplies from Russia, leading to record Russian supplies in 2016, with the trend continuing in 2017.

The value of crude China bought from Russia in 2017 rose 20 per cent over 2013 figures to $23.7 billion — a marked contrast from Saudi Arabia, whose oil exports to China fell 51 per cent to $20.5 billion during the same period.

“Not only is this COSA volume unprecedented for China, but rarely has a single country in Saudi Aramco’s history bought so much oil,” Aramco said in a statement.

“The new supply contracts make it very likely that Saudi Aramco next year will become China’s largest supplier, a position it also held from 2006 until 2016.”

Aramco also signed a Memorandum of Understanding with the China National Offshore Oil Corporation (CNOOC) for an optional 100,000 barrels per day in additional supply, bringing the total signed volume with CNOOC to 723,000 bpd.

The supply agreements “demonstrate once again that Saudi Aramco is a trusted supply choice for world-class refiners and that we are firmly committed to the Chinese market,” said Ahmad A Al Subaey, vice-president of Marketing, Sales and Supply Planning at Aramco.

The deals are part of Aramco’s efforts to diversify its customer base and tap regional demand previously not catered to by Saudi Aramco.

“As the world’s single-largest and fastest-growing crude-importing market, China is important for Saudi Arabia. Companies from the two countries also have joint-venture refinery projects in China as well as Saudi Arabia,” Hari of Vanda Insights said.