Aramco swapping Saudi oil for fuel to tap new markets

Bloomberg

Saudi Aramco’s trading unit started swapping the kingdom’s crude oil for products refined in other countries, allowing the company to tap new markets, according to its chief executive officer.
The company has supplied crude to refiners in the Mediterranean region and gotten fuel in return, Ibrahim Al-Buainain, chief executive officer of Saudi Aramco Products Trading Co., said by phone. The refined products have been sold in Europe, North Africa and the west coast of Saudi Arabia, and the aim is to do more of the processing deals, Al-Buainain said.
“In the Mediterranean there is plenty of spare refining capacity,” Al-Buainain said. “That’s creating opportunities for trading.” Al-Buainain said the company was trading small amounts of Saudi crude in the processing deals and that the swaps allowed it to reach new customers.
Saudi Arabia is the world’s biggest crude exporter and the kingdom is preparing to sell shares in state energy producer Saudi Arabian Oil Co., also known as Aramco, in what could be the world’s biggest initial public offering.
The strategy of dealing in Saudi crude is a change for Aramco Trading which previously bought and sold mostly fuels like gasoline, diesel or fuel oil. Last year the unit started trading crude produced by other countries.

EXPANDING SALES
State oil companies like Saudi Aramco are expanding their crude sales and refining capacity to better compete in a market flush with supply. Crude from US shale oil fields and from Russian deposits is increasingly vying for buyers in Asia, the biggest market for Middle Eastern producers.
“They have to adapt to the market and look to take advantage of opportunities to improve profitability,’’ said Bassam Fattouh, director of the Oxford Institute for Energy Studies.
Aramco has stakes in 5.4 million barrels a day of refining capacity in Saudi Arabia to South Korea and the US. The company aims to double that capacity within a decade even as it battles other crude producers for market share.
The trading unit may also supply crude to Aramco’s 600,000 barrel-a-day Motiva Enterprises LLC refinery in Port Arthur, Texas, the biggest refinery in the US, according to Al-Buainain. “Saudi Aramco is developing the trading business to take advantage of the expansion in their refining business,’’ Oxford’s Fattouh said.
TRADING OPPORTUNITIES
Aramco is increasingly joining integrated oil companies like BP Plc and Royal Dutch Shell Plc that aim to take advantage of their pipelines, storage units, refineries and oil production fields to take advantage of trading opportunities and boost profit. It’s a shift for state oil producers which traditionally pumped crude and shipped it to buyers under long-term contracts.
The wholly owned trading unit of Saudi Aramco has done at least two processing deals with Saudi crude and it’s also traded crude and condensate produced in other countries,
Al-Buainain said.
Aramco Trading handles about 1.5 million barrels a day of refined fuels, and wants to increase that to more than 2 million barrels, Al-Buainain said
in May. It also plans to buy crude from other producers to supply some of Saudi Aramco’s joint-venture refineries globally, he said.

Aramco to transform global stocks with $1.5trn value
Bloomberg

Money managers in the Middle East are confident the sale of government-owned Saudi Arabian Oil Co. this year will shake up the global stock market with a record initial public offering that gives the world’s biggest company a valuation of about $1.5 trillion.
“People focus on Aramco as being the key thing,” said Salman Bajwa, chief executive officer of Dubai-based Emirates NBD Asset Management Ltd., which has $4.8 billion of assets. “In our eyes, it is just one of the several major changes taking place. We have landmark reforms going in the social, economic and markets space. The Aramco IPO will be the confirmation that one phase of structural reforms in the markets space has been successfully completed” because “there are going to be other IPOs, many of state-owned entities,” Bajwa said during an interview in his office last week.
The market capitalisation of Aramco will be almost twice that of Apple Inc., four times bigger than Exxon Mobil Co. and at least one-fifth of the $5.8 trillion MSCI Emerging Markets Index, the benchmark for emerging markets, according to data compiled by Bloomberg.