China has agreed to boost crude oil imports from Saudi Arabia by over a third next year, two Beijing-based trading sources said on Monday, helping fuel new refineries in the world's second-biggest consumer.
Saudi Arabia, the world's biggest oil exporter, will sell Sinopec Corp and PetroChina about 200,000 barrels per day (bpd), or 38 per cent more crude in 2008 than this year, equal to about a tenth of China's total oil consumption.
The deal comes just days after confirmation that China will also boost imports from Iran by a third, both signs of Beijing's desire to strengthen ties with major OPEC producers to ensure a steady flow of oil to keep its economy humming.
The deal also gives Saudi Arabia a growing share of the vast Chinese oil market ahead of the commissioning next year of a new 160,000-bpd refinery in Fujian province in which state-run Saudi Aramco and U.S. giant Exxon Mobil Corp each own 25 per cent, the kingdom's first such investment in China.
The agreed 2008 volume will lift imports to about 720,000 bpd, although that is still only about half as much crude as sold to Japan or the United States, the two biggest customers for Saudi Arabia's 7 million bpd of exports.
"It's an increase of 10 million tonnes from this year," one of the sources told Reuters on condition of anonymity. In the first 10 months of this year China imported about 520,000 bpd of Saudi oil, official customs data showed.
The increased Saudi supplies would mostly be of medium and heavy grades, the traders said.
Top refiner Sinopec, which is more dependent on imports than PetroChina, had asked for a 30 per cent increase in its Saudi oil imports for next year, a trading source told Reuters last month.
A growing share of China's demand for imported oil is being met through long-term contracts, reducing its demand for spot crude and potentially tempering its impact on world markets.
Saudi Arabia has also made clear it is counting on rising demand from expanding Asian economies to justify the tens of billions of dollars it is spending to increase its output capacity to 12.5 million bpd from 11.3 million bpd.
A fresh 500,000 bpd of capacity is due to be added this month at the Khursaniyah project near the Gulf.
China is forecast to log an annual fuel demand growth of more than 5 per cent this year to 7.5 million bpd, the International Eenergy Agency said in its latest monthly report, powered by an economy set to surge by 11.5 per cent this year.
On top of the refinery in Fujian, Aramco has also been trying to get a share in Sinopec Corp's new 200,000-bpd oil plant in east China's Shandong province that is designed to process high-sulphur Saudi crude, industry officials have said. (Reuters)