Saudi Aramco to shift more crude production to petrochemicals

Aramco CEO Amin Nasser said that the Saudi Arabian government remained committed to an initial public offering of the company. (AFP)
Updated 23 October 2018
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Saudi Aramco to shift more crude production to petrochemicals

  • Aramco has been boosting its investments in refining and petrochemicals to secure new markets for its crude
  • Aramco hired JP Morgan and Morgan Stanley to advise on a potential acquisition of as much as a 70 percent stake in SABIC

RIYADH: Saudi Aramco aims to allocate some 2-3 million barrels per day of its crude oil production to petrochemicals, CEO Amin Nasser said on Tuesday, a sign the state energy group is hedging its bets against a possible demand slowdown.
Aramco has been boosting its investments in refining and petrochemicals to secure new markets for its crude, as it sees growth in chemicals central to its downstream expansion strategy.
The company is working on buying a stake in Saudi Basic Industries Corp. (SABIC), the world’s fourth largest petrochemical maker, as part of plans to become a leader in the chemical industry, Nasser told an investment conference in Riyadh.
But anti-trust regulations abroad will mean that the company’s planned acquisition of a controlling stake in SABIC will take time, he said, noting that SABIC has a presence in 50 countries around the world.
Aramco hired JP Morgan and Morgan Stanley to advise on a potential acquisition of as much as a 70 percent stake in SABIC, currently held by Saudi Arabia’s Public Investment Fund, sources said in July.
Nasser said the Saudi Arabian government was still committed to an initial public offering of Aramco, while the timing depended on market conditions and other factors. He added that Aramco could not list while the SABIC deal was ongoing.
Nasser also said bankers had not expressed any concerns about a recent rise in Saudi funding costs ahead of the company’s potential acquisition of the SABIC stake.
“Aramco is well positioned financially,” Nasser told reporters on the sidelines of an investment conference in Riyadh. “So far we have no issue to finance any of our projects. I don’t anticipate seeing any issues in financing.”
He also said it would take Aramco three months to reach maximum oil production capacity of 12 million bpd, if needed.
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. Aramco pumps around 10.7 million bpd of crude oil.


Bitcoin craze hits Iran as US sanctions squeeze weak economy

Updated 18 July 2019
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Bitcoin craze hits Iran as US sanctions squeeze weak economy

  • Some Iranian officials worry that “mining” is abusing the subsidized electricity
  • Iranian Bitcoin miners are purchasing more affordable Chinese ready-made computers

TEHRAN: Iranians feeling the squeeze from US sanctions targeting the Islamic Republic’s ailing economy are increasingly turning to such digital currencies as Bitcoin to make money, prompting alarm in and out of the country.
In Iran, some government officials worry that the energy-hungry process of “mining” Bitcoin is abusing Iran’s system of subsidized electricity; in the United States, some observers have warned that cryptocurrencies could be used to bypass the Trump administration’s sanctions targeting Iran over its unraveling nuclear deal with world powers.
The Bitcoin craze has made the front pages of Iranian newspapers and been discussed by some of the country’s top ayatollahs, and there have been televised police raids on hidden computer farms set up to bring in money by “mining” the currency.
Like other digital currencies, Bitcoin is an alternative to money printed by sovereign governments around the world. Unlike those bills, however, cryptocurrencies are not controlled by a central bank. Bitcoin and other digital currencies like it trade globally in highly speculative markets without any backing from a physical entity.
As a result, computers around the world “mine” the data, meaning they use highly complex algorithms to verify transactions. The verified transactions, called blocks, are then added to a public record, known as the blockchain. Any time “miners” add a new block to the blockchain, they are rewarded with a payment in bitcoins.
To work, the expensive specialized computers require a lot of electricity to power their processors and to keep them cool. In Iran, “miners” have an edge because electricity is cheap thanks to longtime government subsidies. “Miners” also buy cheaper Chinese ready-made computers to do the work.
But the constant raids and authorities’ conflicting statements on the issue have Bitcoin “miners” in Iran incredibly leery of being identified. Those contacted by The Associated Press refused to speak about their work or to say how much they earn from their “mining.”
But they acknowledge they do this to make some money at a time when Iran’s currency, the rial, tumbled from 32,000 rials to $1 at the time of the 2015 nuclear deal, to around 120,000 rials to $1 now.
“It is clear that here has turned into a heaven for ‘miners,’” Mohammad Javad Azari Jahromi, Iran’s minister for information and communications technology, recently told AP in an interview. “The business of ‘mining’ is not forbidden in law but the government and the Central Bank have ordered the Customs Bureau to ban the import of (mining machines) until new regulations are introduced.”
Ali Bakhshi, the head of the Iran Electrical Industry Syndicate, said earlier this month that the country’s Energy Ministry likely would boost costs for Bitcoin “miners” to 7 cents for each kilowatt of electricity they consume, a massive increase from the current half-cent but still almost half the cost of electricity in the United States, according to the semi-official Fars news agency.
Still, there are concerns, especially among Iran’s religious leaders, that people might try to circumvent paying extra for the electricity as well as using digital currency to hide or move money illicitly.
Tabnak, a hard-line news website associated with a former commander of the country’s paramilitary Revolutionary Guard, quoted three ayatollahs describing Bitcoin as either problematic or “haram,” meaning forbidden. Islam prescribes strict rules about finance.
But Jahromi said clerics became more receptive to the idea after his staff briefed them that Bitcoin had a value in the real world, which is required under Islamic finance. Islamic finance also prohibits gambling, the payment of interest and misleading others.
“Some of our top clerics have issued fatwas that say Bitcoin is money without a reserve, that it is rejected by Islamic and cybercurrencies are haram,” Jahromi said. “When we explain to them this is not a currency but an asset, they change their mind.”
Iran has tried to keep its economic situation in check by controlling foreign currency rates and cutting down on those moving their money from the rial to other currencies, including Bitcoin. Last year, the semi-official Mehr news agency quoted Mohammad Reza Pour-Ebrahimi, the head of the Iranian parliament’s economic commission, as suggesting that about $2.5 billion left Iran through digital currency purchases. He did not elaborate and authorities have not discussed it since.
The US, meanwhile, has been keeping a close watch on Iranians holding bitcoins. In November, a federal grand jury in Newark, New Jersey, accused two Iranian men of hacking and holding hostage computer systems of over 200 American entities to extort them for Bitcoin, including the cities of Newark and Atlanta.
“As Iran becomes increasingly isolated and desperate for access to US dollars, it is vital that virtual currency exchanges, peer-to-peer exchangers and other providers of digital currency services harden their networks against these illicit schemes,” said Sigal Mandelker, Treasury’s undersecretary for terrorism and financial intelligence.
Not so, said Jahromi.
“Cybercurrencies are effective in bypassing sanctions when it comes to small transactions, but we do not see any special impact in them as far as mega-transactions are concerned,” he said. “We cannot use them to go around international monetary mechanisms.”