Saudi Aramco and US giant ExxonMobil's first big Chinese downstream oil venture has grown to $5 billion, much more than planned, the firms said today as they closed the books on 12 years of talks.
When the venture with top refiner Sinopec was initially agreed in 2005, estimated investment for the refining and petrochemicals units in southeastern Fujian was $3.5 billion.
Since then, the partners have added a marketing venture with 750 filling stations and a network of terminals, while refinery costs have risen worldwide because of a tight contractor market and escalating prices for raw materials.
Speaking after a ceremony to commemorate final approval of the deal, Sinopec's President Wang Tianpu told Reuters the cost difference was due entirely to the retail and wholesale operation. Aramco and Exxon Mobil declined immediate comment.
The deal is a coup for Exxon Mobil, the world's biggest publicly traded firm, which gets a rare and coveted foothold in the second-largest oil market.
It also gives the top oil exporter Saudi Arabia a guaranteed customer for its future output.
But it may also mark the end of an era of cooperation with major Western oil companies and clear preference for deals with major resource nations, leaving firms without any downstream ties like Chevron or ConocoPhillips in the cold.
"This (deal) was one of the few survivors from China's previous round of foreign cooperation," said Yan Kefeng, of Cambridge Energy Research Associates (CERA).
"The message is very clear now: new JVs will be geared towards such resource players like Venezuela, Russia, Kuwait."
China, an oil exporter 15 years ago, is increasingly anxious about its dependence on imports, now near the halfway point. Saudi Arabia supplies about 16 per cent of its imported crude.
Last year it pledged a host of deals with Russian firms. Earlier this week Venezuela, which hopes eventually to sell more than 1 million barrels a day to China, agreed to open its oilfields to Chinese investment and to help build new refineries.
Despite a flurry of interest in the 1990s, oil majors have also been slow to move in due to China's tight hold on domestic fuel distribution and retail prices.