Saudi Arabia and China have decided to jointly build a major oil refinery in the Red Sea port of Yanbu by 2014. The largest oil producer in the world and second largest oil consumer collaborate and the MSM ignores the story as China is now a larger customer than the US.

This mammoth new refinery is scheduled to be fully operational in the Red Sea port city of Yanbu by 2014.  Over the past several years, China has sought to aggressively expand trade with Saudi Arabia, and China now actually imports more oil from Saudi Arabia than the United States does.  In February, China imported 1.39 million barrels of oil per day from Saudi Arabia.  That was 39 percent higher than last February.  So why is this important?  Well, back in 1973 the United States and Saudi Arabia agreed that all oil sold by Saudi Arabia would be denominated in U.S. dollars.  This petrodollar system was adopted by almost the entire world and it has had great benefits for the U.S. economy.  But if China becomes Saudi Arabia’s most important trading partner, then why should Saudi Arabia continue to only sell oil in U.S. dollars?  And if the petrodollar system collapses, what is that going to mean for the U.S. economy?

At a time when the U.S. is actually losing refining capacity, this is a stunning development.

Yet the U.S. press has been largely silent about this.

Very curious.

But China is not just doing deals with Saudi Arabia.  China has also been striking deals with several other important oil producing nations.  The following comes from a recent article by Gregg Laskoski….

China’s investment in oil infrastructure and refining capacity is unparalleled. And more importantly, it executes a consistent strategy of developing world-class refining facilities in partnership with OPEC suppliers. Such relationships mean economic leverage that could soon subordinate U.S. relations with the same countries.

Egypt is building its largest refinery ever with investment from China.

Shortly after the partnership with Egypt was announced, China signed a $23 billion agreement with Nigeria to construct three gasoline refineries and a fuel complex in Nigeria.

The China Daily reported it as follows

The $8.5 billion joint venture, which covers an area of about 5.2 million square meters, is already under construction. It will process 400,000 barrels of heavy crude oil per day. Aramco will hold a 62.5 percent stake in the plant while Sinopec will own the remaining 37.5 percent.

The deal “represents a strategic partnership in the refining industry between one of the main energy producers in Saudi Arabia and one of the world’s most important consumers”, said Aramco president and CEO Khalid Al-Falih.

Sinopec, the largest producer and supplier of oil products in Asia, is already Aramco’s top crude oil customer, according to Al-Falih. Sinopec Group chairman Fu Chengyu said the project propels the two companies’ strategic cooperation and contributes to enhancing the partnership between China and Saudi Arabia.

Al-Falih called the endeavor the latest chapter in a long history of cooperation, collaboration and trade between China and the Arabian Peninsula.

The setting up of the refinery would promote economic development, said Shen Yamei, a researcher with the China Institute of International Studies.

Watch out USA, looks like your place is being taken 🙂

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