Interface News Reporter | Hou Ruining
Saudi Aramco is still ramping up its exposure to China.
On the evening of April 22, Hengli Petrochemical (600346.SH) announced that its controlling shareholder Hengli Group Co., Ltd. (hereinafter referred to as Hengli Group) has signed a "Memorandum of Understanding" with Saudi Aramco Oil Company, and Saudi Aramco intends to acquire 10% plus one share of Hengli Petrochemical from Hengli Group.
According to the MoU, Hengli Group will support and facilitate the strategic cooperation between Hengli Petrochemical and Saudi Aramco in crude oil supply, raw material supply, product offtake, technology licensing, etc.
If the two parties finally sign a formal agreement on the aforementioned share transfer and business cooperation and successfully implement it, Saudi Aramco will become a shareholder of more than 5% of Hengli Petrochemical.
According to the announcement, the memorandum does not involve a specific amount, but is only a strategic and framework agreement reached by the two parties based on their willingness to cooperate. The discussions related to the transfer of shares and business cooperation involved are not legally binding and do not constitute any legal liability and formal commitment.
Hengli Group was founded in 1994, and its main business includes the whole industrial chain of oil refining, petrochemical, polyester new materials and textiles. The group has one of the world's largest terephthalic acid (PTA) plants, one of the world's largest functional fiber production bases and weaving enterprises, with 170,000 employees. Last year, Hengli Group's revenue was 817.7 billion yuan, ranking 123rd among the world's top 500.
Hengli Petrochemical is one of the three listed companies of Hengli Group. At present, Hengli Group directly and indirectly holds 29.84% of the shares of Hengli Petrochemical, and Hengli Group and its persons acting in concert hold a total of 75.45% of the shares of Hengli Petrochemical.
Hengli Petrochemical's main business is refining, petrochemical, acetic acid, PTA, ethylene glycol, etc., and it is the first listed company in the industry to realize the integration of "crude oil-aromatics, olefins-PTA, ethylene glycol-polyester new materials" in the whole industry chain.
At present, Hengli Petrochemical has a crude oil processing capacity of 20 million tons/year, a coal processing capacity of 5 million tons/year, an ethylene plant of 1.5 million tons/year, an annual output of 5.2 million tons of PX and 850,000 tons of acetic acid.
Last year, Hengli Petrochemical's revenue was 234.791 billion yuan, a year-on-year increase of 5.61%, and the net profit attributable to the parent company was 6.9 billion yuan, a year-on-year increase of 197.83%.
In the first quarter of this year, its revenue was 58.39 billion yuan, a year-on-year increase of 4%, and the net profit attributable to the parent company was 2.139 billion yuan, a year-on-year increase of 109.8%.
In recent years, Saudi Aramco has cooperated with leading Chinese private petrochemical companies.
In March last year, Saudi Aramco announced that it would buy a 10% stake in Rongsheng Petrochemical (002493.SZ) for 24.6 billion yuan, in September of the same year, Saudi Aramco announced that it had signed a cooperation framework agreement with Dongfang Shenghong (000301.SZ) to acquire a 10% strategic stake in Jiangsu Shenghong Petrochemical Group, and in October of the same year, Saudi Aramco announced that it planned to acquire a 10% stake in Shandong Yulong Petrochemical.
On January 2 this year, Rongsheng Petrochemical and Saudi Aramco signed a "Memorandum of Understanding", stating that the two sides are discussing the acquisition of 50% of the equity of Jubail Refining & Chemical Company (hereinafter referred to as SASREF), a wholly-owned subsidiary of Saudi Aramco, and that Saudi Aramco intends to acquire no more than 50% of the equity of Ningbo Zhongjin Petrochemical Co., Ltd., a wholly-owned subsidiary of Rongsheng Petrochemical, and jointly develop the upgrading and expansion of existing units of Zhongjin Petrochemical and the development of a new downstream Rongsheng New Materials (Zhoushan) project.
On April 22, Rongsheng Petrochemical issued the latest progress announcement, saying that it has reached an agreement on the above matters and signed a cooperation framework agreement, and the two parties intend to sell and purchase 50% of the shares of Zhongjin Petrochemical, a wholly-owned subsidiary of Rongsheng Petrochemical, and SASREF, a wholly-owned subsidiary of Saudi Aramco, respectively, as well as jointly develop the expansion projects of Zhongjin Petrochemical and SASREF according to the proportion of equity.
The two sides are conducting further discussions on other matters in the MOU and specific provisions of the cooperation framework agreement.
Rongsheng Petrochemical operates the world's largest single refinery, Zhejiang Petrochemical 40 million tons refining and chemical integration project, and is the world's largest producer of PX, PTA and other chemicals. The performance forecast shows that the net profit of Rongsheng Petrochemical last year was 1 billion to 1.2 billion yuan, a year-on-year decrease of 64%-70%.
Saudi Aramco is the world's largest oil company, producing about one-eighth of the world's crude oil. Since Saudi Arabia launched its Vision 2030 in 2016, the company has stepped up its foreign investment.
According to the "Vision 2030" plan, the Saudi government intends to diversify government revenues through the privatization of state-owned assets and further improve the professionalism of investment vehicles. The vision envisages the transfer of ownership of Saudi Aramco to the Public Investment Fund, making it the world's largest wealth fund.
The Saudi government plans to use the fund to identify strategic industries that require significant capital investment to develop emerging economic industries and establish stable national enterprises.
The vision also proposes to develop long-term partnerships with neighbouring and friendly countries in knowledge transfer and trade, to form a mature financial and capital market that is open to the world, and to facilitate the listing of Saudi state-owned and private enterprises, including Saudi Aramco.
In 2022, Saudi Crown Prince Mohammed bin Salman announced that a 4% stake in Saudi Aramco had been transferred to the Public Investment Fund. After the equity transfer, the Saudi government remains the largest shareholder of Saudi Aramco, holding more than 94% of the shares, and the other 2% is an IPO.
In March, Saudi Aramco CEO Amin Nasser said on an earnings call that China's oil demand is strong and growing, and the company is looking for opportunities to invest further in the Chinese market.
According to the "2023 Domestic and Foreign Oil and Gas Industry Development Report", domestic oil consumption last year was 756 million tons, a year-on-year increase of 11.5%, a record high, the refining capacity increased to 936 million tons per year, ranking first in the world, and the annual crude oil processing volume was 738 million tons, a record high.
The report said that with the end of the rapid recovery period after the epidemic and the accelerated substitution of new energy vehicles for transportation oil, domestic oil demand is expected to enter a low-speed growth stage, and the apparent consumption of China's oil demand will reach 764 million tons this year, a year-on-year increase of 1%.
As of the close of trading at noon on April 23, Hengli Petrochemical's share price was 15.22 yuan, down 2.25%, with a market value of 107.135 billion yuan.