China and Saudi Arabia are expected to sign an agreement on energy cooperation that both sides believe will usher in a new chapter of closer trade relations with significant political ramifications.

Analysts believe the Chinese, already the second-largest consumer of crude after the United States, are looking to solidify oil resources while the Saudis want to diversify their customer base away from overdependence on the United States as a demand source.

At present, 14 percent of China's oil imports come from the kingdom, approximately 450,000 barrels per day.

Monday's Asian Wall Street Journal quoted a Saudi official as saying one agreement will be a memorandum of understanding calling for increased bilateral cooperation and investment in oil, natural gas and minerals.

State-run media reported Abdullah met with President Hu Jintao Monday. The two leaders signed a package of accords on economic and technical cooperation. No details of the deals have been made public.

The king will meet with Premier Wen Jiabao and top legislator Wu Bangguo on Tuesday. Xinhua said the meeting would be "an exchange of views on such issues as the further expansion of bilateral cooperation in energy, economic and trade areas."

Industry-watchers say they think the Saudis will press China for details about its reform of the energy sector, especially Beijing's pricing system and demand projections. Oil product prices are set by the central government rather than by the market and, with skyrocketing crude prices, domestic Chinese refineries are operating at a loss. Most analysts expect reforms will be phased in gradually.

Saleh Al-Hujeilan, Saudi Arabia's ambassador to China, was quoted in news reports Monday as saying the visit is a significant milestone in developing friendly relations between the two countries. The ambassador told China Daily newspaper the king's decision to make the PRC his first stop represented "the great emphasis our country has attached to the relationship with China."

It is the first trip by a Saudi king to China since the two nations established diplomatic relations in 1990. Abdullah will also travel to India, Malaysia and Pakistan. He is accompanied on the journey by an entourage of prominent Saudi businessmen and the country's oil minister, Ali al-Naimi.

The chairman of the Riyadh Chamber of Commerce and Industry and president of the Saudi-Chinese Business Council, Abdul Rahman Al-Jeraisy, said the royal visit aimed to strengthen strategic relations with all four countries.

"The visit will open new horizons to establish joint investment projects and increase non-oil Saudi exports to these countries," Arab media sources said.

Sino-Saudi economic relations have hit a new peak, with two-way trade reaching $14.5 billion dollars over the first 11 months of 2005, according to Chinese trade statistics.

Last year Chinese firms won bids for construction projects in the fields of cement production, telecommunications and infrastructure in the kingdom.

Saudi Arabia is looking for more foreign investment and has already offered projects valued at $624 billion to outside investors in vital sectors including petrochemicals, gas, electric power generation, telecommunications, desalination and railways. A group of Saudi companies plan to set up a petrochemical complex in Jubail with a Chinese partner.

There are some signs of friction with agreements already signed between the two countries. Last week the Shanghai bureau of Interfax reported that a Sino-Saudi memorandum signed four years ago for a 20 million ton oil depot project in the southern province of Hainan appeared to be floundering.

An official with Hainan Provincial Development and Reform Commission was quoted as saying: "We have reached a general cooperation memorandum at the end of 2002, however, the Saudi side has neither recommended any specific Saudi investors nor paid a visit to Hainan yet, which seems that they do not have any sincerity."

The Saudi royal family and the Hainan Haikou Gaofeng Oil Refinery Corporation agreed to establish a 6-million ton oil refinery project and a 20-million-ton oil depot in the memorandum, Interfax reported.

Despite the misgivings over the Hainan deal, the broad agreements reached between China and Saudi Arabia on Monday point to an attempt to forge closer ties aimed at solidifying energy security issues on both sides of the supply and demand equation.

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