ATC grows, evolving plan to compete globally
It is always exciting to watch a new company launch into an industry where it will go head to head against long-established players. Such moves often shake up the competition. That is exactly the scenario faced by Saudi Aramco Products Trading Company (ATC) when it began operations in January 2012. ATC was created as a wholly owned subsidiary of Saudi Aramco to trade refined, liquid chemical and polymer products. Since then, it has emerged as the Middle East’s premier trading company for refined petroleum products, and the region’s largest shipper.
This summer, for the first time, the company supplied Indonesia’s Pertamina, the state-owned oil and natural gas company, with term gasoline barrels. Indonesia is one of the world’s top gasoline importers and this was a hotly contested contract. ATC has joined 15 other regional suppliers to ship gasoline with 88 RON and 92 RON octane. The contract will help to meet Indonesia’s gasoline requirements until December 2018. ATC will supply up to 2 million barrels of gasoline per month during the six-month period. ATC’s participation in supplying term gasoline barrels is thought to be an effort to bolster its presence in the face of robust refined products demand from Southeast Asia.
The Pertamina contract is ATC’s latest success in capturing Asian market share. ATC has already been trading diesel, naphtha and jet fuel sourced from South Korea’s S-Oil. Under the 2018 agreement, S-Oil will supply ATC with up to 25 million barrels of diesel, up to 14 million barrels of
naphtha and up to 7 million barrels of jet fuel.
Aramco Overseas holds 63.4 percent of the common stock of S-Oil, which is South Korea’s third-largest refiner. Previously, S-Oil had most of its refined products activities on a term basis. Working with ATC has boosted S-Oil’s competitiveness in the global market by taking advantage of ATC’s sales channels. This has helped S-Oil to secure a wider range of buyers to maximize revenues.
The crude oil trading business has its ups and downs, so ATC is still active in the liquid chemical and polymer space
Since it started operations, ATC has registered continuous growth. However, in 2017 its horizons expanded enormously when a decision was made for the company to begin buying and selling non-Saudi crude. With ATC now handling a full portfolio of more than 4 million barrels per day (bpd) of crude and refined products, it has come up against such venerable trading firms as the Vitol Group, Royal Dutch Shell and BP.
Initially, the plan was for ATC to become the supplier of non-Saudi crude oil blends to Saudi Aramco’s refineries outside the Kingdom, including Motiva, the biggest refinery in the US. Saudi Aramco plans massive investment of up to $30 billion in Motiva by 2023. Then in May 2018, ATC sold the first US crude oil to the UAE. The shipments handled by ATC to the Abu Dhabi National Oil Company are US shale oil that is close in specifications to condensate, an ultra-light crude oil.
Much of ATC’s business in Asia will pass through the company’s office in Singapore, which was set up in 2017. Singapore has the largest concentration of oil storage in Asia with 10 million cubic meters of independent oil storage capacity. ATC currently handles between 3.3 million and 3.6 million bpd. By 2020, the company aims to boost its volumes for trading crude and refined products globally to 6 million bpd. Such volumes will put ATC on a par with companies such as Vitol, the world’s largest independent oil trader, which trades more than 7 million bpd of crude oil and oil products.
The crude oil trading business has its ups and downs, so ATC is still active in the liquid chemical and polymer space. Earlier this year, Arlanxeo signed an agreement with ATC on the marketing and sales of Ethylene Propylene Diene Monomer (EPDM) rubber under the Keltan KSA trademark. The EPDM Keltan KSA grades will be produced in Rabigh. Then in August, Saudi Aramco proposed the purchase of LANXESS’ 50 percent share in Arlanxeo, valued at €1.5 billion ($1.74 billion) on an enterprise value basis. This will result in Saudi Aramco owning 100 percent of Arlanxeo. Such a purchase diversifies Saudi Aramco’s downstream portfolio at an opportune time and strengthens its capabilities across the petroleum value chain.
- Faisal Mrza is an energy and oil market adviser. He was formerly with OPEC and Saudi Aramco. Twitter: @faisalmrza