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Saudi Aramco ramps up spending in Asian refineries

by Slavka Atanasova

Saudi Aramco is ramping up spending in Asian refineries in what is seen as a move to retain its position as the region’s largest crude oil exporter and win loyal customers for years to come.

Saudi Aramco and its subsidiaries own, or have equity interest, in refineries in Japan, South Korea and China with around 1.3mn bpd capacity.

But China is by far the Kingdom’s biggest market with Aramco being one of the few foreign oil companies with refining ventures in the country.

The Saudi national oil company is part of a group of companies building a processing plant in China and together with Asia’s biggest refiner is looking to build another plant in Fujian province.

In 2007, Aramco partnered with China Petroleum & Chemical Corp. (Sinopec) and ExxonMobil China Petroleum & Petrochemical Company and set up Fujian Refining & Petrochemical Co. Ltd., a refining and petrochemical producer with 12mn tonnes of annual capacity, and Sinopec SenMei (Fujian) Petroleum Company, a processed oil trader with more than 1,000 gas stations in Fujian.

“Currently, Saudi Arabia exports more oil to Asia than to Europe and North America combined”, says Florence Eid-Oakden, CEO of Arabia Monitor.

Accoridng to Oakden, integrating Aramco’s oil exports with refineries in Asia would give the company a hedge against fluctuations in oil prices and a lucrative stake in the world’s biggest consumer markets.

Saudi Arabia has a total worldwide refining capacity of almost 4.5M bpd making the company one of world’s top refiners.

The Kingdom’s move to step up spending in new downstream facilities and leverage production capacity from existing assets comes at a time when some of its biggest competitors such as Iraq, Mexico and Russia are making gains on the Asian market.

"Aramco losing its market share does not mean Saudi will focus elsewhere, but is an indicator of revising contracts, current energy oversupply demands Saudis to show pricing flexibility, and bargains for bulk buyers,"said Mahin Siddiqui, associate at Gulf Intelligence.

She added that instead of trying to break into in new markets, Aramco is better off focusing on Asia which will remain reliant on the Middle East for its crude oil exports.

But slackened demand and slower economic growth in Asia have been a major cause for concern, with many suggesting that Aramco looks elsewhere to maintain growth.

“The next big market will remain Asia, as demand will increase – China’s demand growth may have slowed down but combined Asian growth will definitely still increase in longer term. Already in Asia, the downstream trend is emerging; with Aramco is in talks with Indonesia to establish a petrochemical complex.

“Asia is growing and the market is growing as a buyer’s market. With US production, and gas shortage in India, Pakistan and other Asia, Asia will be the focus for Saudi,” Siddiqui said.

“China is set to increase demand for gasoline, as rapid urbanisation comes earlier than predicted…Refinery exports may well be on their way to replace crude exports,” she added.

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Saudi Aramco ramps up spending in Asian refineries

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