State-Owned Oil Giant Inks $871 Million in Persian Gulf Deals

A subsidiary of state-owned crude oil giant China National Petroleum Corp. (CNPC) has inked two deals to develop oil storage and pipeline facilities in the Persian Gulf as China’s Belt and Road commitments in the region become more concrete.

China Petroleum Pipeline Engineering Co. Ltd. (CPPE) signed a deal with a subsidiary of state-owned Oman Oil Co. S.A.O.C. worth $321 million to build mooring, pipelines, water purification facilities and a sewage treatment plant at the country’s Raz Markaz crude-oil storage project, the CNPC announced in a filing with the Shanghai Stock Exchange on Wednesday.

The entire project will take 28 months to complete and will support Oman Oil in its development of the storage facility, which will able to hold 26 million barrels of crude when the $1.7 billion first phase is finished. The facility is being built in Oman’s remote Duqm Special Economic Zone (SEZ), in what was formerly a sleepy fishing village on the coast of the Arabian Sea, 550 kilometers (345 miles) south of the capital of Muscat, before a consortium of Chinese firms agreed to invest $10.7 billion to turn it into the Gulf’s biggest SEZ.

A separate stock exchange filing on Thursday revealed that CPPE has formally signed a deal with the Saudi Arabian Oil Co. (Aramco) announced earlier this month to build an 844-kilometer (524 miles) pipeline for its development at the Haradh field. The 3.8 billion yuan ($556 million) contract also involves CPPE developing 476 wells and 27 remote transit stations over three years.

The deals come after Chinese diplomatic efforts to develop ties in the region through the Belt and Road Initiative, which aims to expand infrastructure and trade links between China and countries along ancient trade routes with the help of Chinese companies.

President Xi Jinping became the first Chinese leader to visit Saudi Arabia in 29 years earlier last month. Xi also visited the United Arab Emirates, where the two countries signed 13 agreements and memorandums of understanding, Reuters reported. In April, Abu Dhabi announced that it had agreed to cooperate with the Shanghai Stock Exchange to set up a center to raise capital for Belt and Road-related projects over the next few years.

The two pipeline deals also increase the CNPC’s involvement in the region. In May it was reported that the company, China’s biggest oil producer, is mulling taking over Total SA’s stake in the South Pars gas field in Iran if the French company is forced to pull out of the multibillion-dollar project to avoid U.S. sanctions against Iran.

Contact reporter Ke Dawei (daweike@caixin.com)