December 18, 2007

Iran, Saudi to Supply more of China's Crude

TEHRAN (Fars News Agency)- China has decided to boost crude oil imports from Saudi Arabia and Iran, starting next year, Beijing-based trading sources said on Monday.

This would help China to supply new refineries in the second-biggest consumer globally.

Saudi Arabia, the top global oil exporter, is to boost its sales to China by more than a third.

The Saudis will sell China Petroleum & Chemical ( Sinopec) and PetroChina about 200000 barrels per day (bpd), or 38% more crude next year than this year - equal to about 10% of China's total consumption of oil.
China's oil companies will also import 400000 barrels a day from Iran next year, or triple the current imports.

Sinopec signed an accord with Iran recently to exploit the Yadavaran oil and gas field in the country.

PetroChina's parent, China Petrochemical Corporation, is to increase daily crude purchase from Iran from 60000 barrels to 160000 barrels in the coming year.

Also, Chinese oil trader Zhuhai Zhenrong Corporation has struck a deal with the National Iranian Oil Company to buy 1 million tons of fuel oil next year.

Saudi Arabia's deal gives it a growing share of the vast Chinese oil market ahead of the commissioning next year of a new 160000 bpd refinery in Fujian province in which state-run Saudi Aramco and US titan Exxon Mobil each own 25% - the kingdom's first such investment in China.

The agreed volume next year will lift imports to about 720000 bpd, although that is still only about half as much crude as sold to Japan or the US, the two biggest customers for Saudi Arabia's 7-million bpd of exports.

"It's an increase of 10-million tons from this year," one source said.

In the first 10 months of this year China imported about 520000 bpd of Saudi oil, official customs data showed.

The deals are signs of Beijing's desire to bolster ties with major Organization of Petroleum Exporting Countries (OPEC) producers to ensure a steady flow of oil.

Iran has become China's third-largest crude supplier, following Saudi Arabia and Angola.

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 effect on world markets.

Saudi Arabia has also made it clear that it is counting on growing 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 500000 bpd of capacity is scheduled to be added this month, at the Khursaniyah project near the Persian Gulf.

China was forecast to log an annual fuel demand growth of more than 5% this year to 7,5-million bpd, the International Energy Agency said in its latest monthly report, powered by an economy set to surge 11,5% this year.

On top of the refinery in Fujian, Aramco has been trying to get a share in Sinopec's new 200000-bpd oil plant in Shandong province, designed to process high-sulphur Saudi crude .

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