Page 5 - DMEA Week 33 2021

DMEA COMMENTARY DMEA
Refinery Gross Capacity (kbpd)
Jazan* 400 Ras Tanura 550 Riyadh 130 SASREF 305 Yanbu' 250 Domestic Wholly-Owned 1,635 PetroRabigh 400 SAMREF 400 SATORP 440 YASREF 430 Domestic JVs 1,670 Fujian (FREP) 280 Hyundai Oilbank 650 Idemistu 945 Motiva 635 PRefChem* 300 S-Oil 669
Equity
100.0% 100.0% 100.0% 100.0% 100.0%
50.0% 37.5% 62.5% 62.5%
63.4% 100.0% 25.0% 7.7% 17.0% 35.0%
20.0%
Net Capacity (kbpd)
400
550
130
305
250
1,635
200 150 275
268.75
893.75
177.52 650 236.25 48.895 51 234.15
364
Reliance O2C
Source: Company publications, industry research
At the time, RIL’s chairman and managing director Mukesh Ambani said: “Saudi Aramco and Reliance have agreed to form a long term partnership in our oils to chemicals division [...] This signifies the perfect synergy between the world’s largest oil producer and world’s biggest integrated refinery and petrochemicals com- plex.” He added that while the deal was subject to due diligence, by ensuring Aramco crude is used as feedstock for the refinery, the deal could pay for itself within 18 months.
Momentum has been building with Aramco’s chairman Yasir Al-Rumayyan appointed to Reli- ance’s board of directors in June in a move seen as a precursor to the deal moving forward.
Refining strategy
Aramco has a long-stated aim of achieving a global refining slate of 8-10mn bpd. At year-end 2020, it had a gross refining capacity of 6.4mn bpd and a net capacity of 3.6mn bpd.
Reliance O2C owns and operates a refining slate of 1.82mn bpd comprised of the world’s largest refining complex at Jamnagar and another sizeable facility located within the Jam- nagar Special Economic Zone. With one move, the acquisition would increase Aramco’s partic- ipated refining capacity to 8.6mn bpd and its net refining capacity to 4.3mn bpd once the Jazan refinery on Saudi’s Red Sea coast reaches its 400,000 bpd capacity later this year and the trou- bled Pengerang Petrochemical Co. (PRefChem) facility in Malaysia is finally commissioned.
The Indian firm also has petrochemicals assets, a bulk wholesale marketing business, a fuel retail arm which comprises a 51% stake in a JV with BP and oil trading subsidiaries in Singa- pore and the UK.
With Ambani saying in 2019 that Reliance would agree to a long-term purchase of 500,000
1,820
International JVs 5,299 1,761.82 Total 8,604 4,290.57
bpd of Aramco crude, the move further supports the Saudi firm’s strategic objectives, in this case by providing another dedicated crude outlet to which it can expand guaranteed crude place- ment in the Indian market.
Expanding dedicated outlet options is central to Aramco’s plans to shelter its key crude oil rev- enue stream from market volatility. Under the terms of the 2018 deal to acquire a stake in PRef- Chem, Aramco supplies 50% of the refinery’s crude feedstock with the option of increasing it to 70%.
According to the firm’s 2020 annual report, it supplied an average of 54% of crude feedstock to its international JV refineries, outstripping its weighted average participation in these facilities of 42%. “This crude placement provides signifi- cant benefits to Aramco’s operations, including a secure and reliable supply of high-quality crude oil, which helps to ensure a secure and reliable supply of refined products to its downstream customers,” the report said.
Crude sales to wholly owned and affiliated refineries averaged 3.5mn bpd during 2020, accounting for 37% of its total 9.2mn bpd aver- age crude production.
Upon completion of the potential Reliance deal, the resumption of operations at PRefChem and Jazan reaching capacity, Aramco will have a participated refining capacity of 4.29mn bpd. If we assume flows to domestic refineries are main- tained at 2020 levels, sales to affiliated refineries could rise to nearly 4.8mn bpd in 2022, account- ing for more than half of its crude sales without domestic refineries operating at full tilt.
As Aramco contends with concerns about oil demand, it is doing its level best to future-proof its crude operations while forging strategic rela- tionships with some of its most important con- sumer nations.™
Week 33 19•August•2021 w w w . N E W S B A S E . c o m P5