Tag: Saudi Aramco

Saudi Aramco eyes partnerships as it expands refining, petrochemicals

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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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.

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, told Reuters.

Aramco plans to raise its refining capacity to between 8 million and 10 million barrels per day, from some 5 million bpd now, and double its petrochemicals production by 2030, he added. Aramco pumps around 10 million bpd of crude oil.

“Our strategy is very simple. We want to be at 8 to 10 million barrels per day of participated (refining) capacity … (and) we are going forward by trying to be a top leader in chemicals by 2040,” Judaimi said.

“The market that we want to grow in … has to be growing, a strong market, with good demand and of course these assets have to be integrated to the whole value chain of the downstream,” he said in an interview at Aramco’s headquarters in Dhahran.

To help it reach these targets, Aramco has entered a 50 percent 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.

Aramco has said it may introduce a strategic partner to share its 50 percent stake in the Indian refining venture.

Judaimi said Aramco was working with Abu Dhabi National Oil Co (ADNOC) towards securing a partnership. It would be the first time for the two national oil companies to join hands in an international venture.

“We are now finalising the MOU (with ADNOC) that would cover certain commercial principles between us,” he said, adding that the memorandum of understanding would be finalised this year. He said front-end engineering for the project could start by early 2019.

Apart from India, Aramco is also taking a 50 percent stake in Petronas’ huge RAPID project in the southern Malaysian state of Johor.

Aramco hopes this will help it dominate supplies in India and Malaysia, two of the world’s fastest-growing oil markets after China, and where growth potential is bigger than in other, more developed regions. Aramco is eyeing three separate refining and petrochemical projects in China, Judaimi said.

“Asia has to have the lion’s share … We believe markets east of the Suez Canal will continue to grow, including the Middle East as well,” Judaimi said, adding that the United States is “another market we want to grow in”.

In April, Aramco said it was integrating a petrochemicals business into its subsidiary Motiva, the United States’ biggest oil refinery.

Aramco is strengthening its refining role in China, one of its biggest customers. It has a refinery joint venture with Sinopec and Exxon Mobil and is in talks with CNPC to finalise the purchase of a stake in a 260,000-bpd refinery in Yunnan.

Judaimi said he expects to take a final investment decision on the Yunnan refinery, which is operational, by the end of this year.

“We are in the final stage of negotiations. It’s like building a house – the last touches take much longer.”

Aramco plans to build a 300,000-bpd refinery with China’s Norinco. Judaimi said he expects to finish front-end engineering for the Norinco project by mid-2019, following which the company will take its final investment decision.

Judaimi said Aramco had also started negotiations for a third refinery in China.

“It’s a smart refinery with higher conversion of liquids into chemicals,” he said, declining to give details.

‘Last Man Standing’

Aramco has been integrating its refining with petrochemicals to help the company expand its market share and refined products portfolio.

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.

“In the long term, we are thinking of investing more into chemicals,” he said.

“We know the world needs chemicals … as populations grow they need more plastic,” he added.

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.

“This is a very critical programme and we are going to do all we can to make it happen,” Judaimi said.

“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.”

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Apple is almost a $1 trillion company, but watch out for Amazon

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Apple is on the verge of becoming the first $1 trillion publicly listed US company, but even if it gets there, it could soon be overtaken as Amazon.com surges from behind.

Started in the garage of co-founder Steve Jobs in 1976, the iPhone maker’s annual revenue has ballooned to $229 billion, greater than the gross domestic product of countries including Portugal and New Zealand.

Apple’s market capitalisation on Thursday topped a record $934 billion, following its unveiling last week of a $100 billion buyback budget and news that Warren Buffett’s Berkshire Hathaway dramatically increased its stake in the company.

Thanks to a 12% rally since its quarterly report last Tuesday, the Cupertino, California company is just 8% short of hitting the $1 trillion valuation mark.

Pointing to Apple’s recent 31% jump in service revenue, including music streaming and online storage, CFRA analyst Angelo Zino on Wednesday upped his target price for the stock from $195 to $210, which would put Apple’s market capitalisation at $1.03 trillion. Zino joins at least 12 other analysts with price targets putting Apple’s stock market value at 13 digits.

But Apple is in danger of being beaten to the $1 trillion mark — or passed soon after — by Amazon.com, the second largest listed US company by market value, at $780 billion.

Saudi Arabian authorities, meanwhile, have said they expect a planned international initial public offering of Saudi Aramco that would value the national oil producer at about $2 trillion.

While $148 billion smaller than Apple on Friday, Amazon of late has expanded its stock price, and its sales, much more quickly than Apple. Amazon’s stock is red hot, trading recently at over 100 times expected earnings, compared to more-profitable – but slower growing – Apple’s valuation of 15 times earnings.

Apple’s stock has risen 24% over the past year, fuelled by optimism about the iPhone X, the company’s latest smartphone. But demand for the $1,000 device has underwhelmed investors, and bulls are now focused on Apple’s plan to return more cash to shareholders.

By comparison, Amazon’s stock has surged 70% over the past 12 months, bolstered by 31% revenue growth as more shopping moves online and businesses shift their IT departments to the cloud, where Amazon Web Services leads the market.

Amazon is also competing more with Apple and Google owner Alphabet as it sells music and video content, its Fire TV device and its Alexa smart home gadget.

At $765 billion, Alphabet has the third largest market capitalisation on Wall Street, with Microsoft close behind at $749 billion. Amazon breezed past both them both in February.

Including Facebook, the five largest listed US companies now account for 15% of the S&P 500’s $24 trillion market capitalisation.

To be sure, past stock gains are not a reliable predictor of future performance, and the surge in Apple’s and Amazon’s shares in recent years has been exceptional by most standards.

But if Apple’s stock were to keep growing at the pace seen over the past year, the company’s market capitalisation would hit $1 trillion in September. Amazon would reach $1 trillion around October if its stock price continued to rise at the same rate as the past year, and overtake Apple soon after.

Extending forward their own one-year performances, Microsoft would not reach $1 trillion until early 2019, and Alphabet would take until 2020.

Most Wall Street analysts are less optimistic. The mean analyst price target puts Apple’s stock 6 percent above current levels at $200 within the next 12 months, which would elevate its market capitalisation to $983 billion, according to Thomson Reuters data.

The mean price target of analysts covering Amazon is $1,850, a 15% premium over its current price, which would give it a market value of $898 billion. Analysts target Microsoft to rise 12% to reach $845 billion, and for Alphabet’s market value to increase 16% to $884 billion.

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Exclusive: US trade sanctions a fight against protectionism, says US energy secretary

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The US Secretary of Energy, Rick Perry, backed President Donald Trump’s sanctions on Chinese imports, saying one side could not be allowed to manipulate market forces. He added that the President had demanded fairness in trade policy.

He also said the goal of the policy was to make America more competitive in the global market and fight against protectionism, and added that the President was a “good negotiator” and was being “advised wisely” by economic commentator and television personality Larry Kudlow.

Here are the important takeaways from the interview:

Oil prices:

Speaking about global oil prices, which saw an uptick due to supply concerns after the US and its allies launched air-strikes against Syria, Perry said he sees a substantial geopolitical premium built into the price of oil at the moment.

Supplies from the US, however, would not be hit compared to potential disruptions in supply from some Middle-Eastern oil fields, he said.

Perry also left it to the Organisation of the Petroleum Exporting Countries (OPEC) to decide how it would set the price of oil, and refused to comment on current oil prices, saying the market would have to find the right price.

Saudi Aramco IPO:

The former Texas Governor also said he was “big fan” of the Saudi Crown Prince, Mohammed bin Salman, and added the Prince had brought in a new vision for Saudi Arabia.

Perry backed the public offering for the state-owned Saudi Aramco, but said the United States would not interfere with the location of the company’s future listing.

The oil-rich kingdom has walked back on plans for a massive public share offering on a major international exchange based in New York or London, after facing the challenges of taking the world’s biggest oil company public.

Aramco is now expected to list on the Saudi domestic stock market first within the year, and a possible international listing is expected later.

Nuclear energy:

Perry said the US was looking at contractors to build nuclear reactors in India, and called for a stable and predictable regulatory environment for nuclear energy in the country.

He also backed India’s efforts to conclude a deal with reactor-maker Westinghouse Electric, saying the company had dealt with its bankruptcy issues.

The Nuclear Power Corporation of India (NPCIL) is looking to enter an agreement with Westinghouse to set up six reactors with a capacity of 1208 MW each, at Kovvada in Andhra Pradesh.

The US sees great opportunity in the nuclear power sector in India and has spoken about cooperation on nuclear energy in the country, Perry added.

Clean technology:

Shifting the focus to clean and renewable energy, Perry said the US was in talks with Indian private-sector companies on carbon-capture, utilisation and storage technologies (CCUS), and added that his government would be willing to partner with companies on technologies related to oil, gas, wind and solar energy.

Emission rates of green-house and acid-rain inducing gasses such as carbon dioxide, sulphur dioxide, and nitrogen oxide could be brought down drastically with the help of clean technology, he added.

Speaking about the dominance of the United States in shale oil productions, Perry called for greater innovation in the energy sector, adding that the US had seen a change in its energy fortunes due to innovation.

Perry also said he would look to enhance India’s energy portfolio during bilateral talks with oil and power ministries

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Saudi Aramco buys 50% stake in Ratnagiri refinery complex

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Saudi Aramco, an oil company,  has signed a memorandum of understanding with Maharashtra’s Ratnagiri refinery complex.

The MoU was signed on sidelines of the International Energy Forum (IEF) conference.

Dharmendra Pradhan, oil minister, said that the capacity of the refinery is 16 million metric tonnes per annum.

Pradhan, keeping the domestic demand need on priority, said the firm and its Indian partner have been requested to expedite the west coast project.

Khalid al-falih,  Saudi Arabia’s petroleum minister,  said, that the country is happy to invest in India. Saudi Arabia has always been a major oil supplier to India.  Being aware that India’s priority is to meet its demands on oil, he is confident that the crude supply will only increase with Aramco’s investment in India.

Saudi Arabia will supply half of the 60 million tonne capacity, Khaild said.

He pointed that the firm is going to continue looking for more opportunities and is eager to to provide all products such as chemicals and fertilisers to India.

Pradhan said that 50% of the domestic block will be led by the state-owned firms, i.e. IOC, BPCL, HPCL and Aramco will lead the other half in the $44 billion dollar oil refinery.

Indian being a large economy has always had an increasing demand for energy. Khalid said that Saudi Arabian companies have been directed to invest in India’s energy and infrastructure sectors.

For agriculture, the fertiliser manufacturing will help India’s agriculture sector. Saudi Arabia is keen on investing into India’s retail business of all petroleum products. The Ratnagiri plant will have an 80 metric tonne of petrochemical production, Khaild said.

(With inputs from PTI)

Amin H Nasser, President and CEO of Saudi Aramco discusses the company’s future in India.

Edited Excerpts:

Give us more details on the memorandum of understanding (MoU) that you have signed and what kind of stake does Saudi Aramco really hold on to this one?

We are really excited about signing MoU in presence of the two ministers — the Indian minister and our energy minister. This is definitely a major agreement between Saudi Aramco and three Indian companies — Bharat Petroleum, Hindustan Petroleum and Indian Oil. The three companies get 50% of this agreement and 50% for Saudi Aramco. This is a major integrated refinery and petrochemical complex with capacity of 1.2 million barrels per day, 18 million tonne of chemicals, so it is a major investment by Saudi Aramco in the Indian market.

India is one of the big markets for Saudi Aramco. So, what is your sense on partnering on to other areas, products as well? How are you looking at that? Are you in conversation with the other companies too?

We have deals with a lot of Indian companies. They are strategic partners in many ways. We supply close to 800,000 barrels per day in the Indian market. So it is an important market for Saudi Aramco. The growth is very significant in the Indian market. Not only in oil and petrochemical sector, so it is of strategic importance and we are trying to create alliance and joint ventures (JVs) with our partners. We have interest for a long time. This is the first time we culminate all of these efforts with major agreement through this MoU. We are looking as for further growth opportunities within the Indian market. As you highlighted there is growth opportunities, especially in the petrochemical sector as well.

His Excellency, the minister highlighted that there is also interest from other companies such as SABIC in the Indian markets. For Saudi Aramco it has to be integrated between refining and petrochemicals.  Hopefully, there will be more agreements in the future.

The Indian Prime Minister also mentioned on how the maths adds up to an estimate that we are looking at 4.3% energy consumption growth for the next 25 years from now. Is that what we are working with? How do you see then Saudi Aramco being the part of this growth as one of the major players in this space?

As highlighted by the Prime Minister it is 4%. Indian market today imports over 4 million barrels oil. By 2040, the consumption will be close to 10 million barrels and that is very high growth rate. We are the biggest supplier of crude oil in the world. We have the highest reserves available. We are the most reliable player in the market and we have a huge interest in the Indian market and we are through this JV, which is 1.2 million barrels per day and hopefully through other JVs we continue to meet and participate in that growth potential in the Indian market.

Last time I remember when we spoke India was just grappling and understanding the impact of goods and service tax (GST) and then, of course, we have had other policy reforms and another reforms as well? What has your observation been on how India has changed or opened up to the international markets?  

We went through a lot of things and discussions with our partners and all what we have looked at it meets our requirements in terms of participation and as highlighted by His Excellency that the reforms introduced by the Prime Ministers and all are on the right directions helping bringing additional investment to the Indian market.

Saudi Aramco also is spreading itself out in other countries. You recently closed a big deal with France as well. Which are the other countries that the company right now looking to partner with?

Just in the last week, we announced major expansion in our Port Arthur Refinery in US with an investment close to $9-10 billion. Two days ago we announced MoU with TOTAL our partners for also petrochemical expansion to refinery in Saudi Arabia. We have a JV with TOTAL and also it is close to $9 billion of investments.

We just also closed the deal with our partners PETRONAS for 300,000 refining and petrochemical complex in South Johor and hopefully that facility will be on stream next year. We are working with the Chinese, our partners China Petrochemical Corporation (CPC) and Sinopec about potential also JVs in China.

We are also working with our partners in Indonesia regarding refining in Cilacap and hopefully that will also be finalised soon with our partners there.

There is another question which is about Saudi Aramco’s IPO. It has been a subject of a lot of conversation. Is it getting listed this year or the date has been pushed to 2019 and also what exchanges, what countries are you looking to list?

The process for listing Saudi Aramco is on track. It means the preparation for listing the company in the second half of 2018 is ready. The listing will definitely happen in the local stock exchange in the Kingdom. The government will decide on the rest.

Also there is so much happening in the global markets, let us talk a bit about that also because we are looking at the crude oil prices very volatile, there has been the whole import tariffs, geopolitical concerns, would you look at these things at short-term phenomena? If yes, than what are the factors that you see having long term implications when it comes to the energy sector?

There is a healthy growth in the market in terms of the demand. If you look at IEA or EIA- in terms of the demand growth for the last three years you are looking at between 1.5 and 1.6 million barrels. So for three years the demand growth is around 5 million barrels per day. Of course, there is a lot of talk about transformation, which is happening in terms of renewable, electric vehicles and that is taking place definitely. But, it is starting from a low base. We have always said if you look at electric vehicles, the total consumption by electric vehicles is around 100,000 barrels per day.

So, there is a growth, but it is starting from a small base. There is a healthy demand and there is also a natural decline that is happening in existing yields and the natural decline is between 3-5%. So, out of 100 million barrels of supply, there is a need of an additional capacity to offset the decline, which is between 3 million and 5 million barrels per day and meet the additional demand, which is around 1.5 to 1.6 million barrels per day. You need between 3 and 5 million barrels per day of additional capacity to offset the decline and meet the additional demand.

What we are seeing in the market that there is not enough capital being injected by the companies to meet the additional demand requirement in the future. There is USD 1 trillion of capital investment that is either deferred or cancelled and that will have an impact over the long term in terms of meeting the demand requirements. So, there is a transition that is happening, but there is also heathy demand that needs to be met.

What is the kind of demand that you would say or rather the investment that the energy sector has to see to ensure the demand is met over the coming next decade now?

We are in an industry where, of course, to bring any project that takes you between three to five years in terms of additional supplies. Shale oil is definitely bringing additional supply. There is healthy growth in shale oil. Last year almost 600,000 barrels, this year there is a talk about 800,000 barrels of additional supply. But that alone is not enough, even though there is a lot of capital being injected to bring additional shale oil. The decline rate in shale oil is very significant. There is a decline of 70% than the first year.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow