The Saudi "Pivot to Asia"

Energy Fact & Opinion


  • King Salman bin Abdulaziz Al Saud of Saudi Arabia recently concluded a three-week tour of Asia designed to attract and facilitate foreign investment in the kingdom, as well as expand and deepen ties to its Asian neighbors.
  • Given the importance of energy trade in the region, a key highlight of the tour included the signing of multiple memoranda of understandings (MOUs) or joint-venture agreements involving Saudi Aramco and its counterparts in Malaysia, Indonesia, Japan, and China.
    • In Malaysia, Aramco agreed with Malaysia’s state-owned Petronas to acquire a 50 percent equity stake in the country’s Refinery and Petrochemical Integrated Development (RAPID) project. The Saudi’s partnership in, and financial contribution to, RAPID was deemed essential for the completion and commissioning of the project, which is expected to come online in 2019. Under the agreement, Aramco could supply up to 70 percent of the refinery’s feedstock needs.
    • In Indonesia, Aramco and Indonesia’s state-owned Pertamina affirmed a joint-venture plan that aimed at expanding and upgrading a number of refinery projects in Indonesia, including the Cilacap refinery. Here too, Aramco will likely supply the bulk of the crude supply for the facilities.
    • In Japan, under the Saudi-Japan Vision 2030, Aramco and Japan Oil, Gas and Metals National Corporation (JOGMEC) agreed to extend the existing arrangement for storing Saudi crude oil at the Okinawa storage facility for additional three years and to increase the overall storage capacity there by an additional 2 million barrels. Aramco and JX Nippon Oil & Energy also agreed to consider cooperation over refining and petrochemical projects.
    • In China, Aramco and China North Industries Group Corp. (Norinco) agreed to consider jointly building refining and chemical plants in China. Similarly, Saudi Basic Industries Corp. (SABIC) and Sinopec agreed to jointly develop a number of petrochemical projects in both China and Saudi Arabia, as well as to consider increasing investment in their existing joint-venture chemical complex in Tianjin, China.
  • In addition to extensive discussions that centered around oil and energy trade and investment, the size and composition of the Saudi delegation suggested a willingness and interest to encourage and explore enhanced cooperation in the areas of culture and tourism, technology, security and defense, as well as general economic and trade issues. Consistent with the Saudi Vision 2030, the trade tour also included discussions of Asian investment in the kingdom to help diversify its economy beyond oil.


First and foremost, the visit underscores the importance that Saudi Arabia attaches to Asia’s growing economies and their appetite for petroleum and petrochemicals in particular. Saudi Arabia has historically been a leading supplier of crude oil to China, Indonesia, and Japan, and even as the kingdom implements its Vision 2030 (which aims to diversify its economy by facilitating investment into nonenergy sectors and strengthening nonenergy trade), oil nonetheless remains the country’s most significant export and revenue source, and thus, it is the centerpiece of regional trade ties between the kingdom and Asian economies.

Further, the timing and target countries visited by the Saudi contingent points both to the kingdom’s seriousness in securing petroleum sales to Asia and expanding its downstream and petrochemical opportunities. The slowdown in Europe’s oil demand growth and the increase in U.S. oil output have heightened the importance of Asian markets to global oil producers in recent years. Russia, which has launched a shift to Asia for oil and gas export opportunities, increased its crude supply to China by nearly a quarter in 2016, surpassing (at least temporarily) the Saudi crude supply to China. Relieved of sanctions, Iran has also sought to expand export sales to the region. As part of the recent OPEC decision to “freeze” output to support higher prices, Saudi Arabia has been the most diligent in cutting production volumes, although Minister of Energy Khalid al-Falih recently put competitors on notice that the kingdom would not long abide free riders capturing market share.

As a cautionary note, some of these investment opportunities are yet to be fully realized in terms of specific project delivery, and markets, prices, and geopolitical events can always alter projected trajectories. But maybe more profoundly, King Salman’s overture to Asia may represent the most recent example of the kingdom’s new willingness to initiate and be more forward leaning with respect to forging economic and political alliances that serve the country’s domestic investment and broader geopolitical agenda.
Jane Nakano
Senior Fellow, Energy Security and Climate Change Program
Frank A. Verrastro
Senior Adviser (Non-resident), Energy Security and Climate Change Program