Aramco Boosts Fuel-Trading in Fight for Asia, Africa Sales

(Bloomberg) -- Saudi Aramco is seeking to boost its fuel-trading volume by more than a third as the world’s biggest crude exporter expands its capacity to refine oil to grab a bigger share of growing markets in Asia and Africa.

Aramco, as Saudi Arabian Oil Co. is known, is building refineries in the kingdom and in Asia to help it increase sales and purchases of gasoline, diesel and other products to more than 2 million barrels a day, said Ibrahim Al-Buainain, chief executive officer of Saudi Aramco’s trading unit, Saudi Aramco Products Trading Co. Owning refineries gives the unit, known as Aramco Trading Co., options for buying and selling fuel that some of its competitors don’t have.

“The key is that you need to own assets,” Al-Buainain said Monday in an interview in Dubai. “Having information on the market by itself isn’t enough anymore.”  

Aramco has stakes in 5.4 million barrels a day of refining capacity, from Saudi Arabia to South Korea to the U.S. The company targets doubling that capacity within a decade even as it battles other crude producers for market share. Such an increase would make Aramco the biggest crude processor. It’s pursuing the expansion while also planning an initial public offering, which the government asserts will be the world’s largest.

Storage Capacity

Aramco Trading, or ATC, benefits from its parent’s global network of refineries and access to tankers and storage sites, and it currently trades 1.5 million barrels a day, Al-Buainain said. It has 2.6 million barrels of storage capacity at the United Arab Emirates port of Fujairah and 1 million barrels of storage at Yanbu on the Saudi Red Sea coast, he said. The company also blends fuels at those facilities to better meet customers’ requirements, he said.

“You make money because you can optimize,” Al-Buainain said on the sidelines of the Middle East Petroleum and Gas Conference. “You make a bigger shipment instead of a smaller one; you use blending to tailor products to markets and meet the product specifications you want.”

Vitol Group, the world’s biggest independent oil trader, and other trading companies are considering expanding further into refining, storage sites and fuel-retailing chains to increase profit, Chris Bake, an executive committee member and head of origination, said at the same conference. “We look at integrating into the downstream a little further, integrating into refining a bit.”

Aramco Trading, which started operating in 2012, will reach its targeted volume once its parent completes refining projects including a facility at Jazan on the Red Sea and some international ventures, Al-Buainain said. He didn’t specify a date for achieving the target. Aramco has said the 400,000 barrel-a-day Jazan refinery will start next year.

While about two-thirds of Aramco Trading’s transactions go toward supplying the Saudi domestic market and selling its parent’s refinery output, Al-Buainain said he sees opportunities elsewhere in the Middle East as well as in Africa and Asia.

Saudi Arabia has reduced crude output this year as it leads an international effort to curb oversupply. The nation pumped 10 million barrels a day in March compared with 10.48 million in December, according to data compiled by Bloomberg. Benchmark Brent crude was 35 cents, or 0.7 percent, higher at $51.87 a barrel at 1:44 p.m. in Dubai.

ATC has about 200 employees, mainly at its headquarters in the eastern Saudi city of Dhahran. It plans this year to double the staff at its first international office in Singapore to about 20 people, Al-Buainain said.

To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net.

To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Bruce Stanley, Claudia Carpenter