Saudi Arabia Taking Control Of America’s Largest Oil Refinery
The crown jewel among America’s oil refiners might quickly be owned by Saudi Arabia.
Saudi Aramco, the 2015 oil prices state oil company of OPEC’s most powerful player, not too long ago introduced plans to take full management of the sprawling Port Arthur, Texas refinery. The Gulf Coast facility is the most important refinery within the U.S. and can course of 600,000 barrels of oil a day.
Port Arthur has nice strategic value, particularly given the American oil growth that has eased U.S. appetite for international oil.
It would give the Saudis complete control over the refinery. They could then probably deliver extra of their own crude oil into the U.S. for refining and selling within the North American market.
“Saudi Arabia would have an anchor tenant for a lot of their crude oil production,” stated Tom Kloza, international head of power analysis on the Oil Price Data gas Service. “Port Arthur is the jewel the Saudis would like.”
Last 12 months Port Arthur made headlines for becoming a member of a nationwide worker strike over safety considerations. The worker unrest followed an intensive five-yr makeover at Port Arthur that was accomplished in 2012 and doubled the power’s capability.
Related: Cheap oil hits Middle East budgets
Expensive break-up hints at Aramco IPO
Saudi Aramco already owns half of the Port Arthur refinery together with Royal Dutch Shell (RDSA) through a joint enterprise referred to as Motiva Enterprises. But the 2 oil giants have had a contentious relationship for a few years. Final week they announced a letter of intent to break up Motiva.
As part of the tentative deal, Shell will achieve control of two Motiva refineries in Louisiana and nine distribution terminals. Saudi Aramco would get Port Arthur in addition to 26 distribution terminals and the license to the Shell brand for gasoline and diesel gross sales in Texas.
“It is a really expensive divorce,” mentioned Kloza, adding that the two parties weren’t always on the same web page.
That is sensible given the fact Shell and Aramco have different sources of oil. While the Saudis would in all probability prefer Port Arthur to process its personal oil shipped from the Center East, Shell is pumping tons of oil from the deep waters of the Gulf of Mexico.
The Motiva break-up may be an early step towards Saudi Aramco’s plans to go public. In January Saudi Arabia said it is contemplating selling shares of the state-owned oil giant.
Kloza said Motiva could be among the primary assets spun off from Aramco, which controls an unimaginable 261 billion barrels of proven reserves in Saudi Arabia — or roughly 15% of the world’s total.
Related: Crude oil is back from the useless — for now at the very least
One other layer in complex U.S.-Saudi relationship
The Port Arthur deal could solely add to the advanced and generally-awkward power relationship between the U.S. and Saudi Arabia.
On the 2015 oil prices one hand, Saudi Arabia has long been a source of oil for America. The U.S. imported 1.2 million barrels of Saudi oil per day as of the end of February, in accordance with the U.S. Power Info Administration. That’s nearly twice as a lot because the 12 months before.
However U.S. output of its personal oil has practically doubled over the past decade, creating an epic provide glut. And OPEC, led by the Saudis, has refused to chop production to stop costs from crashing.
That is hurt the American oil industry, which is in a severe downturn.
But the Saudis have continued pumping aggressively in an effort to squeeze high-cost producers in the U.S. and elsewhere.
The Port Arthur deal will give the Saudis another avenue for his or her crude.
“It seems like a relatively astute move by the Saudis. It’s an indication of how much they want to maintain a foothold within the U.S.” stated Matthew Smith, director of commodity research at ClipperData.
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