Saudi Aramco agrees to $10 billion joint venture deal in China

Amin Nasser, center, the president and chief executive of Saudi Aramco, Jiao Kaihe, left, the chairman of NORINCO Group, Tang Yijun, the governor of Liaoning Province, during the signing ceremonies in Beijing, China. (Aramco)
Updated 23 February 2019

Saudi Aramco agrees to $10 billion joint venture deal in China

  • The partners will create a new company, Huajin Aramco Petrochemical Co. Ltd., as part of the project
  • Saudi Aramco will supply up to 70 percent of the crude feedstock for the complex

BEIJING: During a visit by Crown Prince Mohammed bin Salman to Beijing, Saudi Aramco on Friday signed a deal worth more than $10 billion for a refining and petrochemical complex in China.

The Saudi delegation, including top Aramco executives, arrived in China on Thursday as part of an Asian tour that included India and Pakistan.

The deal aims to set up a joint venture with Chinese conglomerate Norinco to develop a refining and petrochemical complex in the northeastern city of Panjin in Liaoning province.

The partners would form the Huajin Aramco Petrochemical Co. as part of a project that would include a 300,000-barrel-per-day (bpd) refinery with a 1.5-million-metric-ton-per-annum (mmtpa) ethylene cracker, Aramco said.

The total value of the project is more than $10 billion, making it the largest Sino-foreign joint venture, it added.

Aramco will supply up to 70 percent of the crude feedstock for the complex, which is expected to start operations in 2024.

The investments could help Saudi Arabia regain its place as the top oil exporter to China, a position Russia has held for the last three years. 

Aramco is set to boost its market share by signing supply deals with non-state Chinese refiners.

“Our agreement with Norinco and Liaoning province is a clear demonstration of Saudi Aramco’s strategy to move from beyond a buyer-seller relationship, to one where we can make significant investments to contribute to China’s economic growth and development,” said Aramco CEO Amin Nasser. 

“Our participation in the integrated refining and petrochemical project in Panjin will strengthen our collaborative efforts to enhance energy security, revitalize key growth sectors and industries in Liaoning, and also meet rising demand for products and goods in China’s northeast region.”

There are additional plans to set up a fuels retail business, which will further integrate into the value chain, Aramco said.

By the end of 2019, a three-party company is expected to be formed between Aramco, North Huajin and the Liaoning Transportation Construction Investment Group Co. Ltd. to develop a retail fuel station network in the target markets.

Aramco also signed three memorandums of understanding aimed at expanding its downstream presence in Zhejiang province, one of the most developed regions in China.

Aramco aims to acquire a 9 percent stake in Zhejiang Petrochemical’s 800,000-bpd integrated refinery and petrochemical complex, located in the city of Zhoushan.

The first deal was signed with the Zhoushan government to acquire its 9 percent stake in the project.

The second agreement was signed with Rongsheng Petrochemical, Juhua Group and Tongkun Group, which are the other shareholders of Zhejiang Petrochemical.

Aramco’s involvement in the project will come with a long-term crude supply agreement, and the ability to utilize Zhejiang Petrochemical’s large crude oil storage facility to serve its customers in the Asian region.

An integral part of the project includes a third agreement with Zhejiang Energy to invest in a retail fuel network.

The companies plan to build a large-scale retail network over the next five years in Zhejiang province.

The retail business will be integrated with the Zhejiang Petrochemical complex as an outlet for the refined products produced.

Nasser said the agreements “demonstrate our commitment to the Chinese market and help enhance the strategic integration of our downstream network in Asia. They will further strengthen our relationship with China and Zhejiang province, setting the stage for more cooperation in the future.”

The first phase of the project will include a newly built 400,000-bpd refinery with a 1.4-mmtpa ethylene cracker unit and a 5.2-mmtpa aromatics unit.

The second phase will see a 400,000-bpd refinery expansion, which will include deeper chemical integration than the first phase.

HP rejects Xerox takeover bid, says open to acquiring Xerox instead

Updated 52 min 20 sec ago

HP rejects Xerox takeover bid, says open to acquiring Xerox instead

  • In rejecting Xerox's $33.5 billion cash-and-stock acquisition offer, HP said the offer “significantly” undervalued the personal computer maker
  • Xerox made the offer for HP on Nov. 5 after resolving its dispute with its joint venture partner Fujifilm Holdings Corp.
NEW YORK: HP Inc. said on Sunday it was open to exploring a bid for US printer maker Xerox Corp. after rebuffing a $33.5 billion cash-and-stock acquisition offer from the latter as “significantly” undervaluing the personal computer maker.
Xerox made the offer for HP, a company more than three times its size, on Nov. 5, after it resolved a dispute with its joint venture partner Fujifilm Holdings Corp. that represented billions of dollars in potential liabilities.
Responding to Xerox’s offer on Sunday, HP said in a statement that it would saddle the combined company with “outsized debt” and was not in the best interest of its shareholders.
However, HP left the door open for a deal that would involve it becoming the acquirer of Xerox, stating that it recognized the potential benefits of consolidation.
“With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction,” HP said in its statement.
The move puts pressure on Xerox to open its books to HP. Xerox did not immediately respond on Sunday to a request for comment on whether it will engage with HP in negotiations as the potential acquisition target, rather than the acquirer.
HP on Sunday published Xerox CEO John Visentin’s Nov. 5 offer letter to HP, in which he stated that his company was “prepared to devote all necessary resources to finalize our due diligence on an accelerated basis.”
Activist investor Carl Icahn, who took over Xerox’s board last year together with fellow billionaire businessman Darwin Deason, said in an interview with the Wall Street Journal last week that he was not set on a particular structure for a deal with HP, as long as a combination is achieved. Icahn has also amassed a 4% stake in HP.
Xerox had offered HP shareholders $22 per share that included $17 in cash and 0.137 Xerox shares for each HP share, according to the Nov. 5 letter. The offer would have resulted in HP shareholders owning about 48% of the combined company. HP shares ended trading on Friday at $20.18.
Many analysts have said there is merit in the companies combining to better cope with a stagnating printing market, but some cited challenges to integration, given their different offerings and pricing models.
Xerox scrapped its $6.1 billion deal to merge with Fujifilm last year under pressure from Icahn and Deason.
Xerox announced earlier this month it would sell its 25% stake in the joint venture for $2.3 billion. Fujifilm also agreed to drop a lawsuit against Xerox, which it was pursuing following their failed merger.

Test for new HP CEO
In 2011 as the centerpiece of its unsuccessful pivot to software. Little over a year later, it wrote off $8.8 billion, $5 billion of which it put down to accounting improprieties, misrepresentation and disclosure failures.
More recently, HP has been struggling with its printer business segment recently, with the division’s third-quarter revenue dropping 5% on-year. It has announced a cost-saving program worth more than $1 billion that could result in its shedding about 16% of its workforce, or about 9,000 employees, over the next few years.
Xerox’s stock has rallied under Visentin, who took over last year as CEO. However, HP said on Sunday that a decline in Xerox’s revenue since June 2018 from $10.2 billion to $9.2 “raises significant questions” regarding the trajectory of Xerox’s business and future prospects.