DUBAI Feb 25 Saudi state oil giant Saudi Aramco, U.S. major Exxon Mobil (XOM.N) and China's Sinopec (0386.HK) signed contracts on Sunday for a project to triple the capacity of the Fujian oil refinery in southern China.
The three finalised the deal that they initially agreed in 2005, with a price tag then of $3.5 billion. Statements from Aramco and Sinopec on Sunday did not give the final investment estimate for the project.
Rising steel and labour costs have led to spiralling project budgets, threatening the viability of multi-billion dollar energy schemes.
The Fujian deal gives Aramco and Exxon a foothold in China's insular refining sector, dominated by state giants Sinopec and PetroChina.
The project will boost the Fujian refinery's capacity to 240,0000 barrels per day (bpd) from 80,000 bpd. The expanded refinery will start up in early 2009, Aramco said.
The refinery will process Aramco's heavy crude. Chinese refineries find it difficult to handle this heavy oil, so Aramco has boosted the potential market for its crude by investing in the refinery upgrade.
As part of the project the three will also build a petrochemical complex to produce plastics and gasoline blending components, which will include an 800,000 tonne-per-year ethylene cracker.
Aramco, Exxon and Sinopec also signed contracts for a fuel marketing venture that will manage 750 service stations and a network of terminals in Fujian province.
That gives Aramco and Exxon access to China's protected retail sector.
Global oil majors have jostled to get a foothold in China's fast-growing retail sector. China is the world's second-largest energy consumer.
Aramco and Exxon will each have 25 percent of the refinery and petrochemical joint venture. The Fujian Petrochemical Company Limited (FPCL) will hold the remaining 50 percent.
Sinopec and the Fujian Provincial Government each hold 50 percent of FPCL.
Sinopec owns 55 percent of the fuel marketing venture, while Exxon and Aramco will each own 22.5 percent.
Saudi Aramco's signing of the two contracts is subject to final approval by the Saudi Arabian Supreme Council for Petroleum and Mineral Affairs, Aramco said.