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Aramco & Sinopec to Sign Yanbu Deal in November

Source: Reuters 10/19/2011, Location: Middle East

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State oil giant Saudi Aramco and China's Sinopec Group are expected to sign in November the final agreement to build a 400,000 barrels per day (bpd) oil refinery in Yanbu, industry sources said.

Fu Chengyu, chairman of Sinopec Group said his company would head to Saudi Arabia to finalize the deal without confirming the date of the signing. "We will sign the deal, but the time has not been set yet," he told Reuters. In July, the Chinese government approved Sinopec's plan to jointly build the refinery, after state-run Saudi Aramco struck in March an initial pact to build the $10 billion plant in the world's top oil exporting country. Aramco will hold a 62.5 percent stake in a joint venture formed to develop the project, called Red Sea Refining Co, while Sinopec will own the remainder.

The venture would be the first refining project the Chinese state oil major, parent of top Asian refiner Sinopec Corp , builds outside China, putting it in a race against rival PetroChina which has snatched a string of refinery deals beyond Chinese borders. The refinery was to have been built by U.S. oil firm ConocoPhillips and Aramco. But Conoco pulled out of the plans in April 2010 as it shifted away from the refining business to focus on oil and gas exploration.

Aramco has said it will push on with the project even after ConocoPhillips withdrew and in July 2010 awarded deals to build the refinery, expected to be online in 2014.

"Our co-operator Saudi Aramco has a timetable. We will stick to it," Fu said when asked about the refinery's start-up date.

The refinery is slated to process heavy crude from Saudi Arabia's Manifa oilfield, which is currently under development to reach an output of 900,000 bpd by 2014. Aramco is also building another 400,000-bpd refinery with France's Total in Jubail on Saudi Arabia's Gulf coast. Aramco has already partnered with Sinopec at the joint venture Fujian plant in southeast China. It is considering to build three new joint venture refineries in Asia as part of plans to boost its global refining capacity by 50 percent to over 6 million barrels per day (bpd). Asia is Aramco's largest and fastest growing oil market.

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