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China's Norinco Huajin, Saudi Aramco sign 10 million barrel term contract

Singapore — China's Norinco Huajin refinery in northeastern Liaoning province has signed a contract with Saudi Aramco for the delivery of 10 million barrels of crude in 2019, a company source told S&P Global Platts Friday.

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The total volume is stable from the final contracted volume for 2018 between the two companies, the source said on the sidelines of the 7th China International Oil and Gas Trade Congress.

Norinco Huajin had initially planned to take 12 million barrels in 2018 but lowered it to 10 million barrels due to month-long full maintenance over June-July.

Of the total volume for 2019, Arab Extra Light will account for about 60-70%, with the rest Arab Heavy and a very small portion of Arab Medium, the source said.

Arab Extra Light has an API gravity of around 34 and sulfur content of 1.8%, while Arab Heavy has an API of around 27 and sulfur content of around 2.5%.

According to the source, these Saudi crudes will account for about 20% of Norinco Huajin's total crude imports, with the rest sourced from the Middle East, West Africa and Russia.

Most of the refinery's crude imports are handled by Zhenhua Oil, the trading arm of its state-owned parent company Norinco.

Saudi Aramco rarely sells crude in the spot market and has long supplied China's state-owned refineries via term contracts.

Separately, the source said it did not appear likely the refinery would receive an oil products export quota any time soon, even though parent company Norinco has been pursuing this for years.

Beijing controls the country's product exports by quotas. Currently, only state-owned CNPC, Sinopec, CNOOC and Sinochem hold quotas.

"Norinco keeps applying for export quotas for us and our sister asphalt plant with a 2.3 million mt/year capacity, but there is no sign yet," the source said.

"It is probably because our total capacity is relatively small at 8.3 million mt/year, with a mature market network, which would indicate less urgent need for export outlets," he added.

Two greenfield refineries, Hengli Petrochemical and Zhejiang Petrochemical, would have more pressing need to export, the source said, adding they have bigger capacities and a smaller market network.

Each refinery can produce about 10 million mt/year of gasoil, gasoline and jet fuel.


--Edited by Wendy Wells,