Aramco, Sinopec sign framework pact to expand Yasref into major petrochemical hub

Aramco, China Petroleum & Chemical Corporation (Sinopec), and their joint venture, Yanbu Aramco Sinopec Refining Company (Yasref), have signed a comprehensive Venture Framework Agreement (VFA) that lays the foundation for an ambitious petrochemical expansion at the Yasref complex in Yanbu Industrial City. This strategic development aligns with both companies’ long-term downstream goals and marks a pivotal evolution in Saudi-Chinese industrial relations, coinciding with the 10th anniversary of the Yasref refinery.

The signing ceremony, attended by senior executives from Aramco, Sinopec, and Yasref, symbolises a major step in integrating advanced petrochemical capabilities within the existing refining infrastructure. The move reinforces Saudi Arabia’s intent to lead in high-value chemical production and reflects China’s broader push to diversify energy ties while advancing global sustainability initiatives.

What is the scope of the planned Yasref expansion and why does it matter?

At the heart of this agreement is a plan to develop a fully integrated petrochemical complex at Yasref. The engineering studies now underway are focused on adding a large-scale mixed-feed steam cracker with a production capacity of 1.8 million tonnes per year and an aromatics complex designed to produce 1.5 million tonnes annually. These facilities will be embedded within Yasref’s existing infrastructure, ensuring seamless operational efficiency while diversifying output into higher-margin chemicals.

This is not simply a capacity expansion—it is a strategic shift aimed at turning Yasref from a conventional refining asset into a next-generation refining and petrochemical hub. Aramco’s drive to convert up to four million barrels per day of crude oil into chemicals by 2030 forms the broader context of this initiative. By developing facilities that produce ethylene, benzene, paraxylene, and other derivatives critical to global manufacturing, Aramco and Sinopec are positioning Yasref to play a central role in the global petrochemical value chain.

Such downstream integration is becoming increasingly essential as global oil majors seek to hedge against long-term demand uncertainty for transport fuels. Petrochemicals remain one of the fastest-growing sectors in the energy landscape, driven by demand for plastics, resins, textiles, and speciality chemicals used in everything from smartphones to solar panels.

How does this partnership deepen Saudi-China economic and energy ties?

The announcement is more than an industrial milestone—it is a diplomatic signal. As Zhao Dong, President of Sinopec, noted at the ceremony, Yasref has become emblematic of China-Saudi Arabia cooperation. The new venture comes amid growing interdependence between China, the world’s largest importer of oil, and Saudi Arabia, its top supplier.

China’s Belt and Road Initiative and Saudi Arabia’s Vision 2030 intersect increasingly in the energy and infrastructure sectors. Yasref represents a flagship partnership within this strategic framework. Through the planned expansion, both countries are looking to transcend traditional energy supply models, creating value-added ecosystems around refining, chemicals, and advanced manufacturing.

Beyond Yasref, Aramco and Sinopec are involved in several other joint ventures, including Sinopec Senmei (Fujian) Petroleum Company, the Sinopec SABIC Tianjin Petrochemical joint venture, and a new integrated refining complex under development in China’s Fujian Province. These collaborations reflect mutual interests in enhancing energy security, strengthening industrial supply chains, and pursuing sustainable development models.

What does this deal mean for the future of the petrochemicals sector?

The global petrochemical industry is undergoing a transformation, shaped by shifting demand patterns, stricter environmental regulations, and increasing emphasis on circular economy models. While the transition away from single-use plastics is gaining ground in the West, petrochemical demand in Asia and Africa continues to rise, driven by urbanisation, a growing middle class, and industrial development.

Aramco and Sinopec’s expansion plans at Yasref directly respond to this evolving market. By locating high-capacity petrochemical production at the source of crude refining, the partners aim to capture economies of scale, reduce feedstock transport costs, and maximise energy efficiency. Such integrated facilities are better positioned to weather the volatility in both crude oil prices and demand for end products.

Furthermore, the project fits within a broader strategy by national oil companies (NOCs) to transition from resource extractors to vertically integrated industrial conglomerates. As the global push for decarbonisation intensifies, investments in advanced petrochemical systems that can produce lower-emission materials—such as lighter plastics used in electric vehicles and renewable infrastructure—are expected to surge.

How does the expansion align with Aramco’s downstream growth strategy?

The Yasref expansion exemplifies Aramco’s downstream pivot, which focuses on increasing its footprint in refining and chemicals to mitigate reliance on crude exports. Aramco Downstream President Mohammed Y. Al Qahtani noted that the collaboration aligns with the company’s long-term vision of unlocking the full value of its hydrocarbon resources by prioritising high-value product streams.

This project also contributes to Aramco’s broader goal of becoming a global leader in chemicals. The company has pursued similar expansions in other regions, including its SABIC acquisition, the Huajin Aramco Petrochemical Company in China, and the PRefChem joint venture in Malaysia. By 2030, Aramco aims to have a significant share of its crude oil flow into the chemicals market, transforming the company into a major petrochemical supplier globally.

Moreover, the expansion reinforces Saudi Arabia’s national industrial policy, which aims to diversify the economy beyond hydrocarbons. Creating a petrochemical ecosystem in Yanbu not only attracts foreign investment but also supports local job creation, skills development, and industrial innovation.

What is the current stock performance and sentiment for Aramco and Sinopec?

Saudi Aramco‘s share price has seen recent volatility, reflecting global market conditions and domestic economic events. As of April 6, 2025, Aramco stock closed at SAR 24.92, down over 5% due to market-wide selloffs triggered by U.S. tariff announcements. However, by April 10, the stock had recovered to SAR 26.00, regaining some investor confidence after the U.S. administration temporarily paused new tariffs on many countries, including Saudi Arabia.

Additional support for sentiment came from Aramco’s announcement of 14 new oil and gas discoveries in the Eastern Province and the Empty Quarter. While the reserves are relatively modest, they bolster Aramco’s upstream narrative and long-term resource base. Market observers interpret the company’s strategic shift toward high-margin petrochemicals as a prudent response to declining long-term transport fuel demand.

Given current volatility and geopolitical uncertainties, financial analysts have suggested a ‘Hold’ recommendation for Aramco stock. Investors are watching for how broader trade developments unfold and whether the Yasref expansion accelerates earnings growth in downstream segments.

In China, Sinopec stock closed at ¥5.59 on April 10, down 0.71% from the previous session. While the stock has slipped over 7% in the past month due to trade tensions and policy uncertainty, it remains up nearly 15% year-on-year. Sinopec’s high trading volume suggests strong institutional interest, and its dividend yield of over 5% underscores investor confidence in its long-term fundamentals.

With a market capitalisation exceeding ¥630 billion and a P/E ratio around 17, Sinopec remains a stable investment, but near-term sentiment is cautious. Analysts have also recommended a ‘Hold’ position here, citing ongoing geopolitical volatility and waiting for clarity on the financial impact of expansion ventures such as Yasref.

As the global energy sector pivots towards decarbonisation, Aramco and Sinopec’s renewed focus on high-value petrochemicals reflects a strategic recalibration. With the planned Yasref expansion, the two energy giants aim not only to future-proof their business models but also to redefine the scope of industrial cooperation between Saudi Arabia and China. By transforming Yasref into a globally competitive refining and chemicals complex, this agreement strengthens regional industrial capacity, advances downstream integration, and deepens the geopolitical and commercial ties between two of the world’s energy heavyweights. Investors in both companies are watching this development closely as a potential catalyst for long-term value creation amid global uncertainty.