How Saudi Arabia successfully defended its US oil market share

How Saudi Arabia successfully defended its US oil market share
Updated 31 January 2016

How Saudi Arabia successfully defended its US oil market share

How Saudi Arabia successfully defended its US oil market share

LONDON: Saudi Arabia has successfully defended its share of the US oil market even as rising domestic production from shale and growing pipeline imports from Canada have cut seaborne imports from other countries.
Saudi crude exports to the US have remained relatively constant at around 1.2 million barrels per day since 2009, even as tanker arrivals from other countries have halved from 6 million to 3 million bpd.
Saudi Arabia has have defended its market share through a combination of luck, strategic relationships and skilful marketing, a model the kingdom is now seeking to replicate in fast-growing fuel markets such as China.

CRUDE OIL QUALITY
Saudi Arabia has been fortunate in that the oil produced from shale is not in direct competition with its own crude exports.
Shale oils are very light with a density of only 780-825 kg per cubic meter.
The crude Saudi Arabia exports to the US is much heavier, with an average density of around 860 kg per cubic meter.
Refineries are highly selective about the crude they process since it has a big impact on how efficiently and profitably they can operate as well as problems with equipment fouling and product quality.
Most US refineries have therefore opted to make space for increasing shale production by cutting the amount of other light crudes they buy from countries in West Africa and Latin America.
Imports of medium and heavy crudes from Saudi Arabia and other countries around the Arabian Gulf have not been affected to anything like the same extent.

MOTIVA ENTERPRISES
Saudi Arabia’s oil exports have also been protected by the long-standing strategic relationships the country has with refiners and marketers in the US.
Saudi Aramco, which handles the marketing of Saudi Arabia’s crude, is the successor to the Arabian American Oil Company, a partnership between Chevron, Texaco, Exxon and Mobil established in the 1930s and 1940s.
Chevron (which later acquired Texaco) and Exxon (which acquired Mobil) remain some of the largest importers of Saudi crude into the US, according to customs records.
In 1988, Saudi Aramco bought a 50 percent stake in Texaco’s refining and marketing operations in the eastern US and on the Gulf Coast, which was named Star Enterprises (“Saudi Arabia, Texaco join forces” Los Angeles Times, 1988).
In 1997, Royal Dutch Shell joined the joint venture, subsequently renamed Motiva. When Chevron merged with Texaco in 2001, Texaco’s interest in the combined refining and marketing operations was sold to Shell and Saudi Aramco and reorganized as a 50:50 joint venture between them.
Motiva operates three large refineries in Louisiana and Texas (Convent, Norco and Port Arthur) with a combined refining capacity of 1.1 million bpd.
Motiva also as a network of refined product storage terminals across the eastern US and markets gasoline, diesel and other refined products in 26 states and the District of Columbia under the Shell brand as well as through unbranded wholesalers.
Motiva’s refineries have been optimized to run on the medium-density crude oils Saudi Arabia exports, and the joint venture remains one of the largest importers of Saudi oil, according to the US Energy Information Administration.
Saudi Aramco is hoping to replicate the same sort of strategic downstream integration in China’s fuel market.
The company’s chairman said recently that Saudi Aramco is in advanced talks to invest in refineries in China and the company is also in talks with CNPC and Sinopec about joint investment opportunities in refining, marketing and petrochemicals.

COMPETITIVE MARKETING
Saudi Aramco has also defended its market share through skilful and competitive marketing of crude to independent refiners in the US, including Valero, Phillips and PBF Energy.
Aramco prices competitively via monthly adjustments to official selling prices linked to regional benchmarks designed to protect market share and target sales volumes.
The company also stresses its importance as a reliable supplier and strategic partner for refiners. Unlike some rivals, Aramco does not rely on the spot market to place its oil.
Exports are almost all sold to refiners on term contracts and protected by destination clauses which limit secondary trading in Aramco crude.
Historic ties, downstream integration, strategic marketing relationships and competitive pricing have all helped Saudi Arabia to maintain its share in the US market, which is important for both commercial and political reasons (“Texas refinery is Saudi foothold in US market,” New York Times, 2013).
The company has also benefited from a good dose of luck in that its crude is quite distinct from shale, a good fortune that has not been shared by producers in West Africa.
Saudi Aramco has similar strategic ties to refineries in Japan and South Korea. Now it wants to build them in China as well to protect the company’s long-term future.
The importance of these relationships is one reason why Saudi officials continue to stress their determination to protect their market share and refuse to cut production to support prices unless rivals follow suit.
Russia, Iran and Iraq are the most direct competitors for the crude grades that Saudi Arabia markets so their willingness to match output cuts as part of any agreement is a priority for the Kingdom.

— John Kemp is a Reuters market analyst. The views expressed are his own


Saudi delivery startup raises $2.4m to expand outside KSA

Saudi delivery startup raises $2.4m to expand outside KSA
Updated 39 min 40 sec ago

Saudi delivery startup raises $2.4m to expand outside KSA

Saudi delivery startup raises $2.4m to expand outside KSA
  • The startup uses artificial intelligence and a mobile application to partner companies

JEDDAH: WeDeliver, a parcel delivery startup headquartered in Riyadh, has secured SR9 million ($2.4 million) as part of its first pre-seed investment round, it was announced on Wednesday.

The startup uses artificial intelligence and a mobile application to partner companies that have parcels to be delivered with a network of freelance drivers close by.

The company launched its operations in the Kingdom in April last year, just weeks after the pandemic took hold. Starting first in Riyadh, it has since expanded to Jeddah and the Eastern Province.

Ahmad Ramahi, co-founder and CEO of WeDeliver, said in a press statement: “WeDeliver is a MENA startup with a global vision, driven by an experienced team. We have ambitious plans to enrich our growth in the Saudi market and look forward to expanding to new regional markets.

“We believe that our asset-light collaborative model will disrupt intra-city logistics, enabling faster, more efficient, low-cost delivery for businesses and online sellers,” he added. Nasser Al-Maawi, another cofounder of the startup, said that WeDeliver has seen “strong results” and reported “300 percent growth in the second quarter of this year.”

According to a recent industry report, Saudi startups raised more than a quarter of a billion dollars in venture capital (VC) funding during the first half of 2021.

A total of $1.228 billion was raised by startups in the Middle East and North Africa (MENA) in the first six months of the year, a rise of 63 percent year on year and 12 percent more than was raised during the whole of 2020, according to figures from the MENA H1 2021 Venture Investment Report, published by Dubai-based research platform Magnitt.

According to the report, the top three countries in the MENA region for startup funding were the UAE, Egypt and Saudi Arabia, accounting for 71 percent of total investment. The UAE was the dominant market, making up 26 percent of total funding, followed by Egypt with 24 percent and Saudi Arabia with 21 percent, for a total of $257.88 million.

“It’s also important to note that within this top three ranking, Egypt was the only geography to observe a deal count increase year on year, while Saudi Arabia has almost closed the deal count gap with UAE from 44 deals in 2020 to just an 11-deal difference in H1 2021,” the report said. The food and beverage sector was the most popular among VCs in terms of dollars invested, while the fintech sector generated the most deals.

According to this year’s Global Entrepreneurship Monitor report, total entrepreneurial activity in Saudi Arabia increased in 2020 by 24 percent compared to 2019. It also showed that more than 90 percent of adults saw entrepreneurship as a favorable career choice, while a third of Saudis surveyed said that they were keen on launching a business within the next three years.


MasterCard launches support for cryptocurrency startups

MasterCard launches support for cryptocurrency startups
Updated 29 July 2021

MasterCard launches support for cryptocurrency startups

MasterCard launches support for cryptocurrency startups
  • XRP, a cryptocurrency that Ripple uses in its payments network, rose 15.48 percent on Wednesday

RIYADH: Bitcoin traded higher on Wednesday, rising by 3.95 percent to $39,808.10 at 4:21 p.m. Riyadh time. Ether, the world’s second most-traded cryptocurrency, was down 0.29 percent to $2,291.10, according to data from CoinDesk.

XRP, a cryptocurrency that Ripple uses in its payments network, rose 15.48 percent on Wednesday, trading at $0.74, its highest level since June 21. This represents a daily gain of 13 percent, after the company said it is targeting the $1.8 billion Filipino Remittance Corridor. Ripple announced that Japanese money transfer provider SBI Remit and Philippine mobile payment service Coins.ph have teamed up to move remittance payments from Japan to the Philippines, CoinDesk reported.

Earlier this week, US Sen. Elizabeth Warren wrote to Treasury Secretary Janet Yellen outlining several concerns about the risks posed by cryptocurrencies. Warren asked Yellen to act urgently and adopt appropriate policies to address her concerns.

She claimed that the longer the US waits to introduce the appropriate regulatory regime for these assets, the more likely they will become so entangled in the financial system, potentially creating serious consequences if this market comes under pressure. 

The senator from Massachusetts said: “I have become increasingly concerned about the dangers cryptocurrencies pose to investors, consumers, and the environment in the absence of sufficient regulation in the US,” according to Bitcoin News.

MasterCard on Tuesday announced a new global program dedicated to supporting fast-growing digital assets, blockchain and cryptocurrency companies. Seven startups have signed up for the Start Path program. With Mastercard, the startups will expand and accelerate innovation around digital asset technology and make it safer and easier for people and organizations to buy, spend and hold cryptocurrency and digital assets, Bitcoin News reported.


ExxonMobil, Sabic US petrochemical complex to operate end of 2021

ExxonMobil, Sabic US petrochemical complex to operate end of 2021
Updated 28 July 2021

ExxonMobil, Sabic US petrochemical complex to operate end of 2021

ExxonMobil, Sabic US petrochemical complex to operate end of 2021
  • The project, located near Corpus Christi, Texas, is expected to begin ahead of schedule, likely in the fourth quarter of 2021

RIYADH: A petrochemical complex on the US coast being built Saudi Basic Industries Corporation (SABIC) and ExxonMobil is expected to be operational by the end of 2021, the US energy company said.

The complex — which is being developed by Gulf Coast Growth Ventures (GCGV), a joint-owned company by the Saudi and US companies — has reached mechanical completion of a monoethylene glycol unit and two polyethylene units, ExxonMobil said.

“Gulf Coast Growth Ventures is a key development of our plan to serve growing demand for our high value performance products,” said Karen McKee, ExxonMobil President. 

The project, located near Corpus Christi, Texas, is expected to begin ahead of schedule, likely in the fourth quarter of 2021.

“Not only are we ahead of schedule, but we have executed this project with the highest commitment and emphasis on safety with nearly 18 million safe person-hours worked, all while acting on the promises we made to the community when we started this journey four years ago,” said Abdulrahman Al-Fageeh, SABIC’s executive vice president of petrochemicals. 

GCGV will produce 1,100 kilotons of monoethylene glycol and 1,300 kilotons of polyethylene per year upon completion.

“The benefits of this strategic joint venture will not only accrue to SABIC but also to Saudi Aramco, which bought the company from the Public Investment Fund to create a Saudi synergy in local petrochemical production,” independent economist and former professor of finance and economics at King Fahd University of Petroleum and Minerals Dr. Mohamed Ramady told Arab news.

Once in full production, the new venture will add a welcome stream of additional revenue to SABIC’s profitability and its market value. It is expected to reinforce the Kingdom’s diversification into high-value hydrocarbon products through high-performance plastics, adding to SABIC’s portfolio of agri-nutrients and metals, he said.

“This new strategic joint venture cements the ongoing relationship that SABIC has built over the years with international partners as part of its plans to service its key overseas markets with high quality petrochemical downstream products,” he added.

The project created more than 600 permanent jobs with average salaries of $90,000 per year and an additional 6,000 high-paying jobs were created during construction.

The project is expected to be delivered under budget and at approximately 25 percent less than the average cost of similar projects along the US Gulf Coast.


Oil nears $75 on US inventory decline as pandemic concerns recede

Oil nears $75 on US inventory decline as pandemic concerns recede
Updated 28 July 2021

Oil nears $75 on US inventory decline as pandemic concerns recede

Oil nears $75 on US inventory decline as pandemic concerns recede
  • ‘Supply is likely to remain tight even with the production hikes set by OPEC+,’ says broker

LONDON/RIYADH: Brent crude approached $75 a barrel on Wednesday as a report showed US inventories fell more than expected last week, moving the market’s focus away from concerns that rising coronavirus disease (COVID-19) infections will hurt demand.

Crude in storage fell to the lowest since January 2020, while distillate supplies posted the biggest decline since April, according to a report from the US Energy Information Agency. Fuel inventories fell by more than 2 million barrels.

WTI, the US benchmark, added 0.5 percent to $72.03 a barrel as of 3:48 p.m. in London, while Brent climbed 0.3 percent to $74.72.

Oil is 45 percent higher this year, boosted by a return of demand, as economies have reopened following millions of doses of COVID-19 vaccines, while OPEC+ has kept supply tight.

However, OPEC+ agreed to increase supply by 400,000 barrels a day every month from August, leading to speculation as to whether demand will continue to return.

“Oil supply is likely to remain tight even with the production hikes set by OPEC+,” Naeem Aslam, from online broker Avatrade, told Reuters.

Russia’s flagship Urals crude oil has mostly been used in Europe so far this year due to relatively low output and high prices, while Asian markets have shunned the blend, data showed on Wednesday.

As a result, Russia has lagged behind Saudi Arabia in China’s energy market, one of the world’s largest.

According to Refinitiv Eikon data, the port of Rotterdam, Europe’s biggest oil hub, received 9.7 million tons of Urals in the first half of this year, up from 7.3 million tons in the same period last year.

At the same time, supplies of seaborne Urals cargoes to China plunged to 1.8 million tons from 7.86 million in the first half of 2020.

This year, the spread between Brent — to which Urals is linked — and the Middle Eastern Dubai blend has reached an all-time high of more than $4 per barrel, making Russian oil uncompetitive in Asia.

India has also cut purchases of Urals, while South Korea and Thailand have completely stopped intake of the blend.

Some European countries, notably Finland, have also reduced purchases of seaborne Urals amid the move to greener economies.


Saudi Arabia anticipates 1 trillion riyal injection from 4IR technology

Saudi Arabia anticipates 1 trillion riyal injection from 4IR technology
Updated 28 July 2021

Saudi Arabia anticipates 1 trillion riyal injection from 4IR technology

Saudi Arabia anticipates 1 trillion riyal injection from 4IR technology
  • Artificial intelligence and smart cities will see Saudi Arabia rebrand as a global technology hub

RIYADH: Advanced technology from the Fourth Industrial Revolution (4IR) is expected to generate around 1 trillion riyals for the Saudi economy in new revenue streams, a senior Saudi official told a conference in Riyadh today.

The Kingdom will enjoy economic boosts from robotics, artificial intelligence, and wireless production models as it pushes for more smarter cities and infrastructure.

In his opening remarks of the Saudi 4IR conference, Minister of Communications and Information Technology Abdullah Alsawaha announced the inauguration of the Saudi 4IR center in collaboration with WEF and said that the center will spur more innovation as Saudi cities must keep pace with technological developments.
He told an audience at the two-day conference, being held at King Abdullah City for Science and Technology, that the Kingdom is building the most technologically advanced infrastructure in the new NEOM giga-project, which will be a global technology center.

The impact of the 4IR is expected to be massive, with non-oil gross domestic product anticipated to increase by more than 4 percent from 2017 to 2030, generating 1 trillion riyals in new revenues, Abdullah Alghamdi, the president of Saudi Data and Artificial Intelligence Authority (SDAIA) said in his opening remarks.

He added that SDAIA is working on developing customized platforms for each  city to accommodate their specific needs.

The concept of a Fourth Industrial Revolution was first suggested by Klaus Schwab, chairman of the World Economic Forum, and was the theme of the annual WEF meeting at Davos in 2016. WEF opened its first 4IR Center in San Francisco in 2016, and there are now centers in 13 countries, including Saudi Arabia.

"With this launch you have become part of our growing global network of centers, Schwab said in his remarks to the conference.

Saudi Arabia has invested heavily in digitizing its cities, with 60 percent of the Kingdom’s urban centers covered by 5G networks, said Haytham Alohali, vice minister of communications and information technology.

The government has developed one of the most advanced E-government systems in the world and has established data and AI to support its digital transformation, minister of industry Bandar Alkhorayaf said, adding that the Kingdom has a strong manufacturing base with over 10,000 factories 40 specialized integrated industrial cities that provide the required infrastructure and services needed for the manufacturing facilities and workforce.

The world's leading petrochemical producer, SABIC, strives to keep pace with technical developments and is focused on digital transformation in artificial intelligence, machines, and robotics, CEO Yousef Albenyan told the conference. It also seeks to provide smart solutions to its customers and enhance the competitive process, he added.