Eric Watkins
Oil Diplomacy Editor
Saudi Aramco, as part of a previously announced program of diversification, said it has established a wholly owned products trading subsidiary, Saudi Aramco Product Trading Co.
Said A. Al-Hadrami, Aramco Trading president and chief executive officer, said the new firm would engage only in products trading, and that the decision to establish the firm came in response to changing trade patterns.
"The shift in trade patterns will bring both challenges and opportunities that can be leveraged by the company in balancing its system and create value through the continuous market participation," said Al-Hadrami, who noted that Aramco Trading will be based in the kingdom and will commence trading operations by yearend.
Stephen Schork, president of Villanova, Pa.-based Schork Group Inc., underlined the Saudis' rationale in setting up the new firm, saying that they have made significant investments in downstream capacity over the last 5 years, and the new trading unit marks a natural extension to maximize that value.
Aramco's management team has indicated the firm's new directions in recent speeches. In Singapore in November 2010, Aramco Chairman Ali I. Al-Naimi, who also serves as the kingdom's oil minister, noted the growing demand for oil products in East Asia.
At the time, Al-Naimi also noted the efforts made by Aramco to meet the projected increased demand for energy coming from the Far East.
"Last year, Saudi Aramco completed the largest capital program in company history at a cost exceeding $100 billion and spanning megaprojects in oil, gas, natural gas liquids, refining, and petrochemicals," Al-Naimi said.
In December, Aramco Pres. and Chief Executive Officer Khalid al-Falih said the Persian Gulf region's petrochemical enterprises had been built largely on the competitive advantage derived from gas-based feedstocks, "with refinery petrochemical integration only now starting to emerge."
Al-Falih went on to say, "This area of the business, which offers many opportunities for product diversification and value addition has significant room for growth in the gulf—and Saudi Aramco intends to take an active role in realizing those opportunities."
At the time, Al-Falih said Aramco is investing $40 billion in three refining and petrochemical projects that will add more than 8 million tones of domestic production capacity.
Al-Falih said the investments include $20 billion on a facility Aramco is building jointly with Dow Chemical Co. and up to $8 billion to expand Rabigh Refining & Petrochemicals Co., a venture with Sumitomo Chemical Co. At the same time, Aramco and Total SA are progressing with a $12 billion refinery at Jubail on the Persian Gulf coast.
Aramco recently let a front-end engineering and design and project management services contract to KBR for a grassroots refinery in the Jazan area of southwestern Saudi Arabia (OGJ Online, Feb. 9, 2011).
Aramco said that new refinery, which will have export berths for ships, will be able to process Arabian crude oils and to yield about 75,000 b/d of gasoline, 100,000-160,000 b/d of ultralow-sulfur diesel, and 160,000-220,000 b/d of fuel oil.
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