Saudi Aramco bets on oil supply to Europe, trading expansion

An Aramco oil tank is seen at the Production facility at Saudi Aramco’s Shaybah oilfield in the Empty Quarter, Saudi Arabia. (File/Reuters)
Updated 15 May 2019

Saudi Aramco bets on oil supply to Europe, trading expansion

  • Aramco is looking to finalize deals in the next 2 years through swapping mainly Saudi crude with oil products to supply customers in Europe and the Mediterranean
  • Aramco is expanding its footprint globally by signing new deals and boosting the capacity of its plants to secure new markets for its crude

DUBAI: Saudi Aramco aims to boost its oil supply to Europe by 300,000 barrels per day (bpd) within the next two years as it expands its trading operations there with an office opening this summer in London, a senior company executive said.
Aramco, the world’s biggest oil producer, is expanding its downstream, or refining and marketing, footprint globally by signing new deals and boosting the capacity of its plants to secure new markets for its crude.
The company’s trading arm has been focusing on a new processing arrangement in which it would supply European markets with both crude oil and products.
Aramco is looking to finalize deals in the next two years through swapping mainly Saudi crude with oil products to supply customers in Europe and the Mediterranean, Abdulaziz Al-Judaimi, Aramco’s senior vice president for downstream, told Reuters.
“I am going to bet on Europe... We believe that Europe is a market that we are going to stay in for a long time,” Judaimi said in a telephone interview this week.
“The whole idea is we supply crude, and we offtake refined products to supply markets like Italy, the Balkans, as well as Cyprus ... In Europe, having a virtual dedicated outlet and processing agreement is really the right winning strategy.”
Aramco currently has more than 3 million barrels a month of oil supply and product swap arrangements in Europe, he said. The company has deals with Poland’s PKN Orlen, Greece’s Motor Oil Hellas and Egypt’s Midore.
“We are looking to expand the 3 million barrels to almost 10 million barrels in a month, within the next two years. This means we have almost created a 300,000 bpd refining capacity in Europe,” Judaimi said.
The company has invested in its storage capacity in Egypt and the Dutch port of Rotterdam. About 60% of the capacity of the SUMED storage pipeline in Egypt is for Saudi crude, used by Aramco to reach its customers in Europe, he said.
The Rotterdam terminal now holds more than 6 million barrels of oil, he said.
Aramco will also continue to invest in Greece, Judaimi said.
The priority is to supply refiners with Saudi crude to lock in their capacity, but non-Saudi crude can also be supplied through spot trading.
“This is a win-win strategy because it helps the refiner ... and for us it is to place crude oil in the European refining assets,” he said.
“The refining sector in Europe requires such deals and we are taking advantage of available capacity.”
The state oil giant’s trading arm, Aramco Trading Co. (ATC), plans to open an office in London in July, Judaimi said. ATC has been expanding its overseas operations and increasingly competing with global trading houses in new markets.
ATC logged record trading volumes in crude and refined products of 4.5 million bpd in the first quarter, and is on track to reach its target of 6 million bpd by the end of next year, Judaimi said, close to Vitol’s trading level.
“We started seven years back on trading activities and our growth story is quite a successful story, we started with 300,000 bpd and we are now at about 4.5 million bpd.”
ATC was set up in 2012 initially to market refined products, base oils and bulk petrochemicals, but has since expanded into crude trading.
The trading sector faces increased rivalry between national oil companies (NOCs), international oil firms and Swiss merchants.
NOCs have cheap feedstock and strength in refining, allowing them to compete aggressively with oil majors and especially traders that lack their own production.
ASIAN GROWTH
Aramco, the world’s top oil producer and exporter, aims to become the largest integrated energy firm, with plans to expand refining operations and petrochemical output. It pumps around 10 million bpd of crude, of which it exports about 7 million bpd.
The company plans to raise its refining capacity — inside Saudi Arabia and abroad — to 8-10 million bpd, from around 5 million bpd now. Aramco is expanding its refining business at home as well as in new markets, particularly in Asia.
Judaimi said Aramco’s new, 400,000-bpd refinery in the southwestern Saudi province of Jizan was expected to start later this year.
Aramco will make an investment decision to go with the front-end engineering for its refining joint venture with Chinese defense conglomerate Norinco by the third quarter of this year, he said.
“China focus is important; China now imports a lot of crude oil, and we believe that could be a market that is growing and strong as well.”
He said Aramco was looking at multiple downstream opportunities in India.


A sham Qatar deal could have cost ex Barclays exec $64 mln, court hears

Updated 7 min 29 sec ago

A sham Qatar deal could have cost ex Barclays exec $64 mln, court hears

  • Roger Jenkins stood to get 50 mln stg “good leaver” package -lawyer
  • Defense lawyers tell jury SFO case is misconceived, perverse

LONDON: A former top Barclays executive, on trial in London on fraud charges, would have risked a 50 million pound ($64 million) “good leaver” package if he had sought a criminal deal with Qatar during the credit crisis, a court heard on Thursday.
It would have been “lunacy” for Roger Jenkins, one of three men charged with fraud over undisclosed payments to Qatar during emergency fundraisings in 2008, to risk such accrued benefits and a job that had paid him 38 million pounds in 2007 alone, his lawyer told a jury at the Old Bailey criminal court.
The high-profile Serious Fraud Office (SFO) case revolves around how Barclays — one of the few major British banks to survive the credit crisis without direct government aid — raised more than 11 billion pounds ($14 billion) from Qatar and other investors to avert a state bailout as markets roiled.
Prosecutors allege that former top executives lied to the market and other investors by not properly disclosing 322 million pounds paid to Qatar, disguised as “bogus” advisory services agreements (ASAs), in return for around four billion pounds in two fundraisings over 2008.
Jenkins, the former head of the bank’s Middle East business, Tom Kalaris, who ran the wealth division and Richard Boath, a former head of European financial institutions, deny charges of conspiracy to commit fraud by false representation and fraud by false representation.
Lawyers for Jenkins and Kalaris told the jury the case against their clients was misconceived, perverse and illogical and that there was no evidence the ASAs were a sham or fake.
In brief opening speeches before the prosecution continues laying out its case, they alleged the defendants believed the ASAs were genuine agreements to secure lucrative business for Barclays in the Middle East — a region it was keen to exploit.
They said the agreements were side deals during emergency fundraising that June and October that had been approved by internal and external lawyers and cleared by the board.
“The unequivocal, repeated advice was that this was legitimate — providing the ASA was a genuine contract for the provision of benefits to Barclays,” said John Kelsey-Fry, a senior lawyer representing Jenkins.
Jenkins, who will give evidence later, had pursued and won the trust of Sheikh Hamad bin Jassim bin Jabr Al-Thani, the former prime minister of Qatar, and wanted to unseat Credit Suisse as the wealthy, gas-rich Gulf state’s preferred bankers, the jury heard.
Had Jenkins considered a fraudulent deal with Sheikh Hamad, the sheikh might have rung up Barclays bosses and said: “Neither I nor QIA (the sovereign wealth fund) are putting a penny in a bank like yours. I will never do business with you again,” Kelsey-Fry said.
Qatar Holding, part of QIA, invested in Barclays alongside Challenger, Sheikh Hamad’s investment vehicle.
The case against Kalaris, meanwhile, hung on three conversations he had had with Boath on the afternoon of June 11, 2008, that the prosecution had “fundamentally misunderstood,” his lawyer Ian Winter said.
When Kalaris told Boath: “Noone wants to go to jail here” and that lawyers would provide “air cover,” he was trying to ensure that a genuine ASA would be approved by legal experts as a legitimate means of paying Qatar for real value, Winter said.
All three men, aged between 60 and 64, are charged over the June fundraising. Jenkins, alone, also faces charges over the October fundraising.
The trial is scheduled to last around five months. ($1 = 0.7819 pounds)