Gulf exporters face Russian rival for Chinese petroleum gas market

China is one of the world’s largest consumers of LPG. (AFP)
Updated 30 August 2019

Gulf exporters face Russian rival for Chinese petroleum gas market

  • Typically high logistics costs have been bypassed by a Russian exporter located close to the Chinese border

MOSCOW: An independent Russian producer has made a foray into China’s market for liquefied petroleum gas (LPG), jostling with Middle Eastern countries for what could be a lucrative foothold, market data showed and traders said.

China is one of the world’s largest importers and consumers of the fuel. Key suppliers to the country are the UAE, Qatar, Kuwait and Saudi Arabia, which jointly account for more than 60 percent of China’s LPG imports.

Russia is one of the top oil exporters to China and is set to launch a gas export pipeline connecting the two countries by the end of this year. Its LPG supplies to China are small at this stage, but Moscow is expanding production.

According to rail statistics, Irkutsk Oil Co, known by the Russian acronym INK, shipped around 2,300 tons of propane and butane mixture by train toward the Far East Gas terminal in northeastern China between Aug. 16 and 26.

Despite past attempts by Sibur and Gazprom Neft, high logistics costs have so far prevented LPG exports to China from occurring regularly. But INK is located much closer to the Russia-China border than those firms, giving it a comparative advantage.

INK started producing LPG, which can be used in cars or to produce electric power and petrochemicals, in 2017 and began exports a year later. Until recently, INK was exporting LPG only to Europe.

It cranked up LPG output tenfold year-on-year in the January-June period to 77,000 tons thanks to the construction of a pipeline to a railway loading facility in Ust-Kut, eastern Siberia.

INK plans to increase LPG output to as much as 1 million tons per year by 2020-2021. INK is controlled by its management, with Goldman Sachs and the European Bank for Reconstruction and Development among minority shareholders.

INK declined to comment.

Traders said Swiss trader Avestra Chemical, a co-owner of the Far East Gas terminal, had been in talks with other Russian companies, including Sibur, Gazprom and Rosneft , about LPG supplies to China.

Igor Berezin, chief executive of Avestra Chemical, confirmed to Reuters that the Far East Gas terminal had received its first LPG cargoes from Russia. He declined to comment further.

The terminal, built last year, is set to boost its annual transhipping capacity to as much as 3 million tons in coming years from around 1.8 million tons currently.

Sibur, Rosneft and Gazprom did not respond to requests for comment.

China’s LPG imports rose 3.4 percent year-on-year in the first half of 2019 to 9.785 million tons, Chinese customs data shows.

IHS Markit, an information provider, expects LPG consumption in northeastern Asia to exceed 110 million tons per year by 2025 from 80 million tons in 2018 thanks to the launch of new processing units in China. 

Saudi Aramco shares soar at maximum 10% on market debut

Updated 11 December 2019

Saudi Aramco shares soar at maximum 10% on market debut

  • Company is now world’s largest publicly traded company, bigger than Apple

RIYADH: Saudi Aramco shares opened at 35.2 riyals ($9.39) on Wednesday at the Kingdom’s stock exchange, 10 percent above their IPO price of 32 riyals, in their first day of trading following a record $26.5 billion initial public offering.
Aramco has earlier priced its IPO at 32 riyals ($8.53) per share, the high end of the target range, surpassing the $25 billion raised by Chinese retail giant Alibaba in its 2014 Wall Street debut.
Aramco’s earlier indicative debut price was seen at 35.2 riyals, 10 per cent above IPO price, raising the company’s valuation to $1.88 trillion, Refintiv data showed.
At that price, Aramco is world’s most valuable listed company. That’s more than the top five oil companies – Exxon Mobil, Total, Royal Dutch Shell, Chevron and BP – combined.
“Today Aramco will become the largest listed company in the world and (Tadawul) among the top ten global financial markets,” Sarah Al-Suhaimi, chairwoman of the Saudi Arabian stock exchange, said during a ceremony marking the oil giant’s first day of trading.
“Aramco today is the largest integrated oil and gas company in the world. Before Saudi Arabia was the only shareholder of the company, now there are 5 million shareholders including citizens, residents and investors,” said Yasir Al-Rumayyan, the managing director and chief executive of the Saudi Public Investment Fund.
“Aramco’s IPO will enhance the company’s governance and strengthen its standards.”
Amin Nasser, the president and CEO of Saudi Aramco, meanwhile thanked the new shareholders for their confidence and trust of the oil company.
The sale of 1.5 percent of the firm, or three billion shares, is the bedrock of Crown Prince Mohammed bin Salman’s ambitious strategy to overhaul the oil-reliant economy.
Riyadh’s Tadawul stock exchange earlier said it will hold an opening auction for Aramco shares for an hour from 9:30 a.m. followed by continuous trading, with price changes limited to plus or minus 10 percent.

The company said Friday it could exercise a “greenshoe” option, selling additional shares to bring the total raised up to $29.4 billion.
The market launch puts the oil behemoth’s value at $1.7 trillion, far ahead of other firms in the trillion-dollar club, including Apple and Microsoft.
Two-thirds of the shares were offered to institutional investors. Saudi government bodies accounted for 13.2 percent of the institutional tranche, investing around $2.3 billion, according to lead IPO manager Samba Capital.
The IPO is a crucial part of Prince Mohammed’s plan to wean the economy away from oil by pumping funds into megaprojects and non-energy industries such as tourism and entertainment.
Watch the video marking Aramco’s opening trading: