The Capital Undercurrent in the Desert: China’s Banks, Saudi Gas, and the “Absent” Chinese Funds

Finance and Energy: A Dance Between Gas and Money

On October 2, 2025, Reuters revealed that as Saudi Aramco sought to raise $11 billion in leaseback financing for its Jafurah unconventional gas project, four Chinese state-owned banks suddenly became the main players. Bank of China, Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China jointly contributed more than $3.7 billion, with roughly $1 billion each, while Agricultural Bank offered slightly less, around $750 million. The total loan accounted for more than one-third of the project’s financing.

This phenomenon is hardly isolated. Back in 2021, Saudi Arabia had already signed about $10 billion in development contracts for the Jafurah project. With an estimated 200 trillion cubic feet of gas reserves and 7.5 billion barrels of condensate, Jafurah is considered the largest liquid-rich shale gas resource in the Middle East. Aramco plans to use this project to increase Saudi natural gas sales by 60% by 2030, freeing up conventional crude oil for higher-value chemical conversion. In this round of financing, the Chinese banking system’s enthusiasm aligns perfectly with Saudi Arabia’s strategy of boosting natural gas self-sufficiency and freeing crude for chemical transformation.

What makes this particularly intriguing is the contrast: while the banks were eager, Chinese sovereign funds and large financial institutions declined to participate in the $6 billion equity investment led by BlackRock and Global Infrastructure Partners (GIP). This deal involves a newly formed Jafurah midstream company leasing natural gas processing and transportation assets from Aramco for 20 years. Aramco retains a 51% stake, while GIP-led investors hold 49%. Reuters noted that Chinese funds were invited but ultimately abstained, citing Beijing’s policy direction amid the U.S.-China trade war and technology restrictions—urging state capital to “stay away from U.S. private equity”. This move sharply contrasts with China’s earlier openness, such as the Silk Road Fund and China Merchants Capital’s participation in Aramco’s pipeline transaction in 2022. Around the same period, the Financial Times reported that several Chinese sovereign funds were withdrawing commitments to U.S. private equity and trimming American asset exposure. Against this backdrop, the warmth of China-Saudi collaboration at the banking and industrial project level, juxtaposed with the coldness at the fund level, paints a complex picture of geo-financial realignment.

Behind China’s Banking Enthusiasm: Energy Security and Industrial Opportunity

Why banks and not funds? The first answer lies in energy security. The Jafurah project will include natural gas processing facilities, natural gas liquids separation units, compressors, and 1,500 kilometers of pipelines. Once operational, it can replace about 500,000 barrels of crude oil per day in power generation, freeing that oil for downstream chemical use, supporting Aramco’s expansion in ethane, LNG, and condensates.

Traditionally reliant on Middle Eastern oil, China now faces rising demand for stable natural gas supply to power homes, generate electricity, and feed its chemical sector. Supporting Jafurah helps strengthen Saudi Arabia’s “oil-to-gas” shift while paving the way for Chinese companies to secure future access to premium gas, blue hydrogen, and blue ammonia projects.

The industrial implications are equally significant. Aramco expects Jafurah to yield over 420 million standard cubic feet per day of ethane and 630,000 barrels per day of LNG and condensates by 2030. These liquids—rich in ethane and propane—are key feedstocks for ethylene, propylene, and butadiene production. Studies show that ethane, as a byproduct of natural gas processing, is rapidly becoming the dominant feedstock for North American olefins, thanks to its cost advantage. Meanwhile, as hydraulic fracturing matures and methane supply surges, producers are exploring direct or indirect methane-to-olefin (MTO) conversion. For Chinese banks, loans to Jafurah are not just about long-term interest income—they’re strategic positioning for future ethane, NGL, and blue hydrogen markets, fitting China’s broader “dual-track” model of oil and gas integration.

The Message Behind the Funds’ Absence: A New Geo-Financial Balance

Unlike banks, sovereign funds prioritize investment safety and political risk. With U.S.-China tensions intensifying, Washington has expanded foreign investment reviews and export controls, blacklisting firms like Huawei and tightening scrutiny of Chinese capital. Under these conditions, Beijing has instructed state-owned capital to reduce exposure to U.S. private equity, particularly those involving sensitive technologies. The Financial Times confirmed that multiple Chinese sovereign funds are indeed retreating from U.S. private equity under policy pressure.

The BlackRock-GIP-led Jafurah midstream financing involves many American investors, meaning any Chinese participation would trigger U.S. regulatory scrutiny over capital flows, adding complexity. In contrast, direct lending to Saudi state enterprises fits China’s “real economy cooperation” narrative and bypasses the U.S. financial system, lowering exposure risk.

This strategic divergence reflects China’s broader rebalancing of global asset allocation. On one hand, state-owned banks continue to invest in real-economy Belt and Road projects, deepening ties with resource-rich nations. On the other, sovereign funds are pulling back from U.S. financial assets, channeling money into Eurasian and “friendly” markets. This is not mere risk avoidance—it’s a deliberate effort to shape a new global financial order. Selective Chinese participation erodes U.S. dominance in large-scale energy financing and gives Middle Eastern nations leverage to diversify their capital partners. In the near future, leaseback models like Jafurah’s could be replicated in China-Saudi cooperation, with Chinese banks moving toward equity partnerships, while funds may seek joint ventures with local entities to mitigate political risk.

Jafurah’s Industrial Spillover: Blue Hydrogen, Methanol, and Olefins

Jafurah is more than a gas project—it’s Saudi Arabia’s testing ground for a low-carbon economy. The kingdom aims to leverage its shale gas and carbon capture capacity to produce 2.5 million tons of blue ammonia by 2030. Initially, the target had been 11 million tons per year, but was scaled down due to a lack of long-term purchase agreements. Still, blue ammonia and hydrogen remain central to Saudi Arabia’s energy transition, and analysts note that Aramco plans to use Jafurah’s gas to enhance hydrogen value chains. As the global hydrogen economy expands, Chinese firms—with engineering strengths in hydrogen production, ammonia cracking, and carbon capture—could emerge as natural partners for co-development or technology sharing.

At the same time, natural gas has broad applications in methanol production. Market forecasts project that the global methanol market will grow from $45.56 billion in 2025 to $55.8 billion by 2030, driven by demand in automotive, construction, and electronics sectors. Natural gas remains the dominant feedstock, offering abundant, low-cost carbon and hydrogen. Methanol, in turn, can be converted into MTBE, DME, or olefins via MTO processes, and even serve as a clean fuel. For Saudi Arabia, channeling Jafurah gas into methanol and olefin production opens a new export chain. For China—the world’s largest methanol and MTO consumer—this presents a golden opportunity. Most Chinese methanol is coal-based, with high carbon intensity. Participating in Jafurah’s methanol or olefin development would provide low-carbon feedstocks and enable technology-driven profit sharing.

Natural gas is also the primary feedstock for ammonia synthesis. Globally, the ammonia market is valued at $160.1 billion in 2024, projected to reach $308.7 billion by 2033. In Europe, natural gas accounts for 70–85% of ammonia production costs, with two-thirds used as a hydrogen source. However, in China—where natural gas is scarce—about 85% of ammonia is produced via coal gasification, generating 3.5–4.5 tons of CO₂ equivalent per ton. As carbon border taxes and hydrogen trade frameworks emerge, partnering in Jafurah’s blue ammonia projects could help Chinese fertilizer producers lower feedstock carbon intensity and capitalize on Saudi Arabia’s low-cost gas.

Olefins—core monomers for plastics, fibers, and rubber—are also deeply tied to gas-derived NGLs like ethane and propane. U.S. olefin studies show that ethane consumption reached 21.55 million tons in 2017 and continues rising, as it significantly reduces production costs. With hydraulic fracturing expanding methane supply, producers are exploring methane-to-olefin technologies. Saudi Arabia plans to leverage Jafurah’s ethane and condensates to produce ethylene and propylene via steam cracking, mirroring this trend. For Chinese chemical companies, participating in Aramco’s ethylene–polyethylene ventures or building MTO units could secure low-cost feedstocks and gain logistical advantages for exports to Europe and Africa. Moreover, Saudi Arabia’s low-carbon ambitions may attract international green financing, lowering project capital costs and boosting returns.

Conclusion: Financial Decisions Reflect a New Industrial Order

From a financial standpoint, Chinese banks’ participation in Jafurah reflects a strategy of “focusing on the real economy, being cautious with capital markets.” Lending to gas infrastructure locks in stable long-term returns while supporting China’s “Go Global” policy for industrial enterprises. Meanwhile, the sovereign funds’ hesitation underscores the growing risk of U.S. exposure and a broader geopolitical reconfiguration of capital. BlackRock’s midstream deal proceeding without Chinese investors highlights how American financial giants are losing their one-call influence in Middle Eastern energy projects. Saudi Arabia, in turn, balances the equation by welcoming Abu Dhabi’s Mubadala and Lunate as co-investors, positioning itself between Western and Eastern capital flows.

From an industrial perspective, Jafurah not only strengthens Saudi Arabia’s gas and liquid hydrocarbon base but also injects new momentum into the global gas–hydrogen–chemical value chain. As natural gas remains the key feedstock for methanol, ammonia, and olefins, its cost and availability will shape the future of global chemical competitiveness. With its abundant low-cost gas and emissions-control technologies, Saudi Arabia aims to become a new export hub for blue hydrogen and blue ammonia. For Chinese firms, this is a window of opportunity to optimize energy structure and secure a first-mover advantage in global energy transition and chemical upgrading.

In the new round of geo-financial chess, the Jafurah gas project may only be the beginning. Bank enthusiasm, fund retreat, industrial expansion, and political calculation together sketch a complex energy-financial map. For the chemical industry, it signals both challenge and opportunity: whoever moves first in this game of “gas and capital” may well define the next generation of the global chemical value chain.