Saudi Aramco, the world's largest oil export company, has begun preliminary discussions with Jiangsu Dongfang Shenghong to acquire a 10% stake in the petrochemical subsidiary of this Chinese energy company.

According to the cooperation framework agreement signed by the two companies, Saudi Aramco intends to become a strategic investor in Jiangsu Shenghong Petrochemical Group, which the company stated on Wednesday, referring to its subsidiary. However, Saudi Aramco stated that the possible acquisition of a minority stake "requires due diligence and the necessary regulatory permits.

As part of the agreement, Saudi exporters will also supply crude oil and other raw materials to Jiangsu Shenghong Petrochemical Group. The two companies also plan to collaborate on the development of a large-scale expansion project.

Mohammed Al Qahtani, downstream president of Saudi Aramco, stated that the signing of this cooperation framework agreement is another important milestone in Saudi Aramco's downstream strategy, aimed at improving the conversion of Arab crude oil to chemicals and expanding into the crucial Chinese market.

Jiangsu Dongfang Shenghong stated that the strategic framework agreement does not create any legal obligations or formal commitments, and only reflects the initial intention and principles of cooperation between the two parties.

Jiangsu Shenghong Petrochemical Group is located in Xuwei Petrochemical Industrial Park, Jiangsu Province, China. It owns and operates a comprehensive refining and petrochemical complex with a daily production capacity of 320 million barrels. It also owns a methanol to olefin and derivative complex, and has pure terephthalic acid production facilities through its wholly-owned subsidiary.

As of August 6th, Saudi Aramco is the world's third largest company by market value, with a market value of $2.08 trillion, second only to Microsoft ($2.44 trillion) and Apple ($2.86 trillion). In terms of revenue, it is the second largest company after Wal Mart, and Wal Mart has been ranking first since 2014.

Last month, the company stated that due to voluntary production cuts and a decline in crude oil prices, its second quarter net profit was weak, although the results met analysts' expectations.

The company stated at the time that during the three months ending in June, its net profit after Tianke decreased by 38% from a record $48.4 billion in the same period last year to approximately $30.1 billion.

Saudi Aramco has been expanding its influence in important global markets and strengthening its downstream business. Last month, it agreed to purchase 100% equity in Esmax Distribuscion, a downstream fuel and lubricant retailer in Chile, from private equity firm Southern Cross Group. In July, Saudi Aramco completed a transaction to acquire a 10% stake in Shenzhen listed company Rongsheng Petrochemical for $3.4 billion.

Four months ago, a subsidiary of Saudi Aramco acquired a 10% stake in Rongsheng Petrochemical, a transaction worth $3.6 billion that will significantly expand its refining business in China.Editor/XingWentao