Saudi Arabia’s state-owned petroleum and natural gas company Aramco is in discussions to purchase a minor stake in Chinese oil and natural gas company Shandong Yulong Petrochemical.

Aramco has signed a Memorandum of Understanding (MoU) with Nanshan Group, Shandong Energy Group, and Shandong Yulong for the potential acquisition of a 10% stake in the Chinese company.

The stake purchase is subject to due diligence, negotiation of transaction documents and required regulatory approvals, said Aramco.

Aramco downstream president Mohammed Y Al Qahtani said: “Aramco values Shandong for its current strength and future prospects.

“We believe this collaboration has the potential to enable all parties to contribute to China’s energy security and development, and aid in navigating the energy transition.

“With Aramco’s long track record as a reliable supplier of energy to China and the expertise and commitment of Shandong Province, we envision a prosperous future together.”

Shandong Yulong is currently at the completion stage of construction at its refining and petrochemicals complex at Longkou, Yantai City, in the eastern Chinese province of Shandong.

The Shandong Yulong Petrochemical Longkou Complex is designed to process around 400,000 barrels per day (bpd) of crude oil and produce a large volume of petrochemicals and derivatives.

Under the terms of the MoU, Aramco is expected to supply crude oil and other feedstock to Shandong Yulong’s new refining and petrochemicals complex.

Last month, Aramco signed a framework agreement with Jiangsu Eastern Shenghong to potentially acquire a 10% stake in Jiangsu Shenghong Petrochemical Industry Group.

Jiangsu Shenghong is a wholly owned subsidiary of Eastern Shenghong, and the agreement is subject to due diligence, negotiation, and regulatory approvals.