Wednesday 13, June 2018 by Jessica Combes

Saudi Aramco eyes partnerships as it expands refining, petrochems

 

Growth in chemicals central to its downstream strategy to lessen the risk of a slowdown in oil demand

Saudi Aramco plans to boost investments in refining and petrochemicals to secure new markets for its crude, and sees growth in chemicals as central to its downstream strategy to lessen the risk of a slowdown in oil demand.

Aramco, the world’s biggest oil producer, is expanding its footprint globally by signing downstream deals and boosting the capacity of its plants, ahead of an initial public offering next year, the largest IPO in history.

According to Reuters the state oil giant is moving ahead with multi-billion-dollar projects in China, India and Malaysia and aims to finalise new partnerships this year, Abdulaziz al-Judaimi, Aramco’s senior vice president for downstream, adding that there are plans to raise capacity to between eight and 10 million bpd, almost double its current refining capacity of five million. Aramco plans to double petrochemical production by 2030.

To help it reach these targets, Aramco has entered a 50 per cent joint venture with three Indian refiners to build a $44 billion, 1.2-million-bpd refinery integrated with petrochemical facilities on India’s west coast, Reuters said.

Judaimi added that Aramco is working with Abu Dhabi National Oil Co (ADNOC) toward securing a partnership. It would be the first time for the two national oil companies to join hands in an international venture, adding that the MoU should be finalised by the end of 2018 and front-end engineering could start as early as 2019.

Aramco is also taking a 50 per cent stake in Petronas’ huge RAPID project in the southern Malaysian state of Johor in the hopes this will help it dominate supplies in India and Malaysia, two of the world’s fastest-growing oil markets after China. Judaimi said the growth potential is bigger than in other, more developed regions and Aramco is eyeing three separate refining and petrochemical projects in China.

Aramco is strengthening its refining role in China, one of its biggest customers. It has a refinery joint venture with Sinopec and Exxon Mobil (XOM.N) and is in talks with CNPC to finalise the purchase of a stake in a 260,000-bpd refinery in Yunnan, currently operational, and the decision is likely to be made by the end of the year, Reuters said.

Judaimi added that Aramco plans to build a 300,000-bpd refinery with China’s Norinco front-end engineering for the Norinco project expected to be finished by mid-2019, following which the company will take its final investment decision. “It’s a smart refinery with higher conversion of liquids into chemicals,” he said, declining to give further details to Reuters.

Aramco has been integrating its refining with petrochemicals to help the company expand its market share and refined products portfolio and the company is betting on growing demand for fuel in India and Southeast Asia but also shifting more into petrochemicals in case those consumption forecasts prove too optimistic. Judaimi said that the long-term view is to invest more into chemicals.

One centrepiece of Aramco’s push into chemicals is a project it is building at home with Saudi Basic Industries Corp (SABIC), the world’s fourth-biggest petrochemicals company. The $20 billion project with SABIC is to build a complex that converts crude oil into chemicals directly, bypassing the refining stage. Judaimi said Aramco would make a final investment decision by the end of 2019.

“We believe we are the last man standing in terms of energy supply. Our cost position on the upstream side, our reliability, our location and our infrastructure are all competitive advantages to us,” he said, Reuters added.

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