SAUDI ARABIA - Part 4 - The Overseas Refining & Market Share Investments.

The state-owned Saudi Aramco has partnerships in overseas oil refining and retailing ventures with a total nameplate capacity of 1.678m b/d. Of these, refining capacities of 923,000 b/d are in the US and Greece. The other 755,000 b/d are in South Korea, the Philippines and China.

Private Saudi businessmen have built up an impressive overseas presence from the upstream end to refining and distribution. They have links to key members of the royal family, and are widening their presence overseas. Corral Petroleum of the Amoudi family owns Preem Petroleum of Sweden which has moved to Morocco and other markets. Nimir Petroleum of the Bin Mahfouz family has ventures in Yemen and in distant countries such as Sakhalin in Russia's Far East and Venezuela. Delta International, a smaller but agile company, is involved in Azerbaijan and elsewhere (see Gas Market Trends).

The state-controlled Saudi Arabian Basic Industries Corp. (SABIC) is negotiating to aquire EniChem in Italy so that it could become the leading olefins producer in Europe; and at home it is raising its petrochemicals production capacity from about 35m t/y to 48m t/y by 2010 (see Downstream Trends No. 18). SABIC has been discussing with Iran's state-owned National Petrochemical Company (NPC) a joint petrochemicals venture in Iran. It has also been studying a proposed takeover of an existing aromatics plant in Thailand, a major buyer of SABIC fertilisers. The Saudi government says it will eventually sell much of its 70% SABIC stake to the private sector.

Saudi Aramco's International Division, created in 1991, is in charge of the company's overseas investments. It handles all matters from oil sales to transportation and storage, monitoring market developments and new investment opportunities, pursuing negotiations with potential partners and acquiring logistics in key locations.

In August 2001, Saudi Aramco launched a contracting service on its internet website. An electronic bulletin board lists contracts for which solicitation of interest and prequalification is open to companies already registered as contractors with Saudi Aramco. Companies can download and submit its prequalification questionnaires.

The division has been monitoring consolidation among the majors in the petroleum industry, which began in 1996 with a European downstream merger of BP and Mobil. Then came the US downstream merger agreement in 1997 between Shell and Texaco for one venture called Equilon Enterprises and between Shell and Star Enterprise (50-50 Texaco and Saudi Aramco) for another venture called Motiva Enterprises. The trend accelerated in 1998 when BP took over Amoco and then Arco.

Later Exxon acquired Mobil. For Chevron to take over of Texaco in October 2001, it was required by the Federal Trade Commission (FTC) to shed some of Texaco's assets in the US. Saudi Aramco bought the latter's 17.2 stake in Motiva, thus raising its equity in this to 50%. Shell bought Texaco's remaining equity in Motiva and raised its stake in it from 32.8% to 50%.