The deal comes a day after Saudi Aramco and its Chinese partners agreed to build a refining and petrochemical complex in China’s northeast. Image Credit: Shutterstock

Saudi Aramco, the world's biggest oil producer, has agreed to buy a 10 per cent share in one of China's oil refining giants for 24.6 billion yuan ($3.6 billion), in a move that significantly expands its refining presence and secures future sales into the country.

Apart from the stake in Rongsheng Petrochemical Co, the deal also includes an agreement to sell 480,000 barrels a day of crude oil to Rongsheng's refinery in the eastern province of Zhejiang over a 20-year period, according to an exchange filling from the Shenzhen-listed company. The complex has an oil-refining capacity of 800,000 barrels a day. Aramco will provide a credit of $800 million for the oil purchase.

The deal comes a day after Saudi Aramco and other Chinese companies agreed to jointly invest in a new refining and petrochemical plant in China's northeastern Liaoning province, accelerating developments that were paused during the pandemic. Aramco will supply as much as 210,000 barrels a day of crude feedstock to the project.

"This announcement demonstrates Aramco's long-term commitment to China and belief in the fundamentals of the Chinese petrochemicals sector," Mohammed Y. Al Qahtani, Aramco Executive Vice President of Downstream, said in a statement.

The agreements are being inked at a time when Saudi Arabia's position as the dominant crude supplier to China is being challenged by Russia. Moscow has been courting buyers in China as well as India since the war with Ukraine prompted sanctions that have shrunk its pool of buyers. Last month, Russia was China's top supplier of crude oil.

Aramco has locked in a combined 690,000 barrels per day of oil sales to China in exchange for its investments over the past two days. Aramco Trading Singapore Pte., another unit of Aramco, also signed contracts to trade oil, fuels and chemicals with Rongsheng's unit in Singapore.

As part of the deal with Rongsheng, the refinery will provide oil storage for Aramco for five years from when the supply contract takes effect.

Rongsheng has a 51 per cent equity interest in Zhejiang Petroleum and Chemical Co., which in turn owns and operates the largest integrated refining and chemicals complex in China.