As Asia continues to drive nearly all global oil demand growth and is poised to sustain this trend for decades, some of the world’s largest oil producers, particularly in the Middle East, are focused on strengthening their positions in this critical market.
Saudi Arabia’s state-owned Aramco and Abu Dhabi’s ADNOC are both planning to grow their downstream businesses, with a particular emphasis on Asia. Their strategy aims to secure long-term demand for their crude in the region’s expanding petrochemicals sector.
Over the past two years, Saudi Arabia has announced several key downstream partnerships in Asia, including ventures in China and South and Southeast Asia. The country is positioning itself to capture more market share for its crude oil as demand for petrochemicals rises.
China, however, is expected to soon reach a peak in its demand for road transportation fuels like gasoline and diesel. This shift is attributed to the rapid rise of electric vehicles (EVs) and LNG-powered trucks. Despite this, Saudi Arabia and OPEC remain confident that global oil demand will continue to rise. They maintain that the long-anticipated peak in oil demand is still far off.
Both OPEC and the International Energy Agency (IEA) are at odds regarding long-term oil demand forecasts, but they agree on one point: India will soon surpass China as the biggest driver of global oil demand growth. According to OPEC’s World Oil Outlook 2050, India, along with Asia outside China, Africa, and the Middle East, will be the primary sources of increased demand over the next few decades. These four regions are expected to see an additional 22 million barrels per day (bpd) in demand by 2050, with India alone contributing 8 million bpd. Meanwhile, China’s demand is expected to rise by just 2.5 million bpd.
In particular, the petrochemical sectors in China, as well as refining and petrochemicals in India and Southeast Asia, will play a key role in driving global oil demand.
To capture this demand growth, the Middle East’s top oil producers are stepping up their efforts. ADNOC, in partnership with Borouge and Borealis, announced in July that it would collaborate with China’s Wanhua Chemical Group to explore the feasibility of developing a cutting-edge polyolefin complex in Fuzhou, China, with an annual capacity of 1.6 million tons.
Saudi Aramco, the world’s largest crude oil exporter, is also making significant moves in Asia. In September, the company signed new agreements with China’s Rongsheng Petrochemical and Hengli Group to strengthen ties in the refining and petrochemical sectors in both China and Saudi Arabia. Aramco’s deal with Hengli Group could lead to the company acquiring a 10% stake in Hengli Petrochemical, pending due diligence and regulatory approvals.
“China is a key market for our global downstream growth strategy, and we look forward to deepening our relationship with this critical market,” said Mohammed Al Qahtani, President of Aramco Downstream, in September.
Aramco continues to explore acquisition opportunities in the downstream and LNG sectors, with a particular focus on Asia. In 2023, the company expanded its footprint in Pakistan by acquiring a 40% stake in Gas & Oil Pakistan Ltd., one of the country’s largest retail and storage companies.
Aramco also struck two major refinery and petrochemical deals in China, further solidifying its position in the country’s downstream sector. These deals also create a new export outlet for an additional 690,000 bpd of Saudi crude to China.
Most recently, Aramco signed a collaboration agreement with Vietnam’s state-owned Petrovietnam, exploring potential partnerships in the storage, supply, and trading of energy and petrochemical products. As Al Qahtani noted in April, “We are always looking for new opportunities in important markets, advancing our liquids-to-chemicals strategy.”
As global demand for oil, particularly in Asia, shows no signs of slowing down, Middle Eastern oil giants like Aramco and ADNOC are making strategic investments to secure their role in the region’s growing petrochemical market.
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