Kuwaiti Emir Sheikh Sabah al-Ahmad al-Jaber al-Sabah, right, is followed by Chinese President Hu Jintao as they inspects guard of honor during a welcome ceremony at the Great Hall of the People in Beijing. Photo by Andy Wong: AP

Kuwait and China deepened their energy ties on Monday when officials from the two countries signed a long-awaited deal to build a $9 billion refinery complex in southern China's Guangdong province. The deal -- sealed during a visit by Kuwaiti ruler Sheikh Sabah Al Sabah to Beijing -- will require Kuwait to export at least 500,000 barrels of crude per day to China when the refinery opens in 2013.

Fifty percent of the refinery will be held by Asia’s top refiner Sinopec, 30 percent by Kuwait Petroleum International, and 10 percent each by Dow Chemical and Shell. The 300,000 barrels-per-day refinery plus a 1 million ton-per-year ethylene cracker will be located in Zhanjiang city. Earlier plans called for putting the facility in the Nansha district of Guangzhou city. But the Nansha location was close to protected wetlands and the densely populated and polluted Pearl River Delta region, including Hong Kong and Macao.

China and Kuwait have been negotiating for several years on a variety of energy projects including the Guangdong project. The Kuwaitis want to gain a foothold in China’s booming downstream sector and Chinese companies are eager to play a role in future upstream activity in Kuwait. Chinese companies have increased their exposure to Kuwait in recent years by building crude gathering systems, pipelines and land rigs.

In April, China's second-largest oil company, Sinopec, signed a $350 million deal to build five land rigs for Kuwait Petroleum Corporation, marking the debut for the Chinese company in providing rig services to Kuwait. Last year, Kuwait tendered for 27 rigs. The tender is part of Kuwait's plan to boost oil production capacity to 4 million barrels-per-day by 2020. Sinopec also has a 10 percent stake in a Chevron-led international consortium bidding for the $8.5 billion Project Kuwait.

Kuwait’s economy has fallen along with oil prices. The country has canceled a number of energy projects worth $33 billion including a $17 billion deal with Dow Chemical. An OPEC member, Kuwait contains 10 percent of the world's proven oil reserves. It is expected to raise its crude exports to China by 36 percent this year to 160,000 barrels-per-day including 120,000 barrels-per-day to Sinopec. By 2015, KPC expects to supply up to 700,000 barrels-per-day to two refineries in China including the refinery in Guangdong and one owned by Sinochem in Fujian province.

By Seth Myers

The Guangzhou complex will help Kuwait increase its chemicals capacity to meet growing demand in Asia Pacific and beyond. It is in line with Kuwait’s policy of expanding petrochemical industry outside the country and participating in refining and marketing assets in international markets.

For Kuwait, China is an important crude buyer and is eager to secure downstream investments that will ensure China, through partnering with Sinopec, to process its crudes, giving it a long-term market. Kuwait is a small player in the marketing segment compared to integrated oil and gas companies such as ExxonMobil or Shell. The company hopes to expand its refining operations in China in order to secure enough downstream market.

For China, a closer relationship with Kuwait means greater security, as its domestic crude production only provides about 50 percent of its needs.