Saudi Arabia and China discuss stability of global oil market

REUTERS/Lisa Leutner

Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman and China’s National Energy Administrator Zhang Jianhua have agreed to work jointly to support the stability of the international oil market, state-owned Saudi Press Agency (SPA) reported.

The officials agreed to continue close communication and strengthen co-operation to address emerging risks and challenges, the report said, highlighting the importance of long-term and reliable oil supply to stabilise a dynamic global market currently facing complex and changeable international situations.

The two sides also discussed cooperation and joint investments along the Belt and Road countries, as well as investments in integrated refining and petrochemical complexes in both countries.

The officials discussed establishing a regional hub for Chinese manufacturers to use Saudi Arabia’s favourable location.

They also stressed the importance of cooperation in electricity and renewables and collaborate in clean hydrogen through research and development, SPA said.

The Middle East received the largest share of China’s $28.4 billion investments through its Belt and Road Initiative (BRI) during the first half of 2022, with Saudi Arabia the single biggest recipient.

The BRI was launched by Chinese president Xi Jinping in October 2013. Over the last nine years a total of $932 billion has been spent developing projects throughout Asia, Africa and Latin America.

While overall BRI spending between January and June this year declined four percent year-on-year to $28.4 billion, the Middle East was the destination for 57 percent of all funding over the period.

Saudi Arabia topped the global rankings with $5.5 billion, according to research by the Shanghai-based Green Finance and Development Center (GFDC).

Freddie Neve, Middle East Associate at London-based think tank and advisory service Asia House, told AGBI the company had identified growing Chinese investments in the Gulf in recent years.

They are due to synergies between aims of the BRI and the Gulf states’ economic diversification plans, he said.

“Saudi Arabia’s Vision 2030 programme, for example, aims at positioning the kingdom as a key global trading hub, by expanding and modernising its ports, and improving other domestic infrastructure, including its rail network and airports,” Neve said.

“This aligns with the BRI’s focus on trade infrastructure. We’ve seen Chinese investment in some interesting projects, such as Jeddah Islamic Port, Jizan Port, and the Jeddah to Mecca and Medina light railway.”

Oil and gas represented around 80 percent of Chinese overseas energy investments and 66 percent of construction contracts in the first six months of 2022.

One of the biggest deals saw China’s state-owned Silk Road Fund become part of an international consortium that bought a 49 percent in Saudi Aramco’s gas pipelines subsidiary for $15.5 billion.

The GCC accounts for around two-thirds of China’s imports of crude oil.

Dr. Christoph Nedopil Wang, director of the GFDC and author of the report, said China’s stronger engagement in the Middle East, especially in the hydrocarbons sectors, “might also be driven by some of the Western companies’ interest in reducing some of the oil and gas investments in the region, which can be seen as an opportunity for Chinese partners.”