China's Sinopec To Build Gas Pipelines For Saudi Aramco In $1-Billion Deal

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by Tyler Durden
Friday, Jun 07, 2024 - 09:00 AM

By Tsvetana Paraskova of

A subsidiary of China’s energy giant Sinopec has signed a $1.3-billion deal with Saudi Aramco to procure and build pipelines for an expansion of the Kingdom’s natural gas distribution network, the Chinese firm said on Thursday.

Under the turn-key fixed-price contract worth $1.3 billion (5.17 billion Saudi riyals), Sinopec International Petroleum Services Corporation, a wholly-owned subsidiary of Sinopec Oilfield Service Corporation, will be responsible for the in-country procurement and construction of Packages 6 and 7 of the Phase 3 Pipeline Project Clusters of the Master Gas System.

Mechanical completion of the project is expected by May 31, 2027, under the contract, Sinopec said in a filing with the Hong Kong Stock Exchange.

The project, Phase 3 Pipeline Project Clusters of Saudi Aramco MGS, is the third phase of the development of Aramco’s commodity natural gas pipeline project, Sinopec says.

The Saudi oil giant has in recent years expressed its intention to boost its natural gas production and sales in the Kingdom, to deliver gas to more customers and replace part of the crude that is currently being burnt for power generation in Saudi Arabia.

After scrapping oil capacity expansion plans earlier this year, the Saudi state oil giant Aramco is now poised to boost natural gas output by 60% by 2030, executives said earlier this year.

In the third quarter of last year, Saudi Arabia made two significant natural gas discoveries in two fields in the Empty Quarter, along with the discovery of five reservoirs in previously discovered fields. 

Demand for gas is seen increasing significantly amid a global energy transition, which has prompted Saudi Arabia to move more quickly to open up the development of unconventional natural gas fields. Global LNG demand is expected to grow by 50% by 2030.   

Aramco has also entered the international LNG market and is reportedly in discussions with U.S. LNG developers to buy a stake in one planned project and sign a long-term LNG offtake deal from another proposed export facility.