WATCHING THE WORLD MIDDLE EAST TARGET: PACIFIC RIM
The booming economies of the countries around the Pacific Rim are the next target for expansionist downstream affiliates of state oil companies of the Middle East.
After breaking into the established but slowly growing U.S. and European markets, Saudi Arabia and Kuwait have embarked on a much more demanding task: gaining entry to the highly protected Japanese downstream business.
Japan is not the only country marked for attention. Kuwait's state company is preparing to open its first gasoline service stations in Thailand, one of the most attractive Pacific Rim prospects where the oil products market is growing at 15-16%/year.
SAUDIS MOVE ON JAPAN
Saudi Arabia finally appears to be making progress in its attempt to crack Japan's reluctance to see newcomers in its downstream business.
Top level contacts between the administrations in Tokyo and Riyadh could lead to formal meetings between representatives of the two governments later this year.
Masashi Yamamoto, director general of Japan's Natural Resources and Energy Agency, which is affiliated with the powerful Ministry of International Trade and Industry (MITI), will visit Saudi Arabia later this month to meet Hisham Nazer, Saudi Arabia's minister of petroleum and minerals.
The meeting in Riyadh is designed to set the scene for a conference between Nazer and Japan's international trade minister in Tokyo in March. That's when the whole question of Saudi entry into the Japanese downstream business is expected to be thrashed out.
It's clear that the Japanese want to attach strings to creation of a Saudi presence in the refining and marketing business.
MITI wants to ensure that setting up a Saudi owned operation in Japan is part of an overall program to reform Japan's refining and marketing.
The Saudi connection must also guarantee for the Japanese market stable deliveries of crude and products in the years ahead, particularly when the balance between supply and demand is more precarious than at present.
Finally, MITI wants any downstream deal to create opportunities for Japanese engineering firms and contractors in development of the Saudi upstream business at a time when Saudi Aramco is planning a multibillion dollar investment program to return sustainable production to more than 10 million b/d.
KUWAIT'S THAILAND ENTRY
In Thailand, the first of Kuwait Petroleum's QB gasoline stations are scheduled to open later this spring. The company hopes to eventually build a chain of at least 200 retail sites, all of them greenfield developments.
Kuwait Petroleum's successful entry into the European market was achieved through the acquisition of existing refinery capacity and marketing networks.
With the acquisition path blocked in Thailand, Kuwait Petroleum has started the complex business of acquiring service station sites and is recruiting staff to manage and operate them.
So far, Kuwait's only other Pacific Rim activity has been an aviation fuel business in Hong Kong. More airport business is targeted in its entry into Japan.
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