Saudi Arabia Now Controls The largest Oil Refinery In North America
The Port Arthur refinery in Texas is North America’s largest oil refinery, and as of this week Saudi Arabia controls all of it. With the stroke of a proverbial pen, Saudi’s state-owned oil large Aramco took on one hundred % ownership of the port, cementing its entry to the profitable U.S. power market at a essential time.
Business experts say this week’s deal is Aramco’s newest power play earlier than its highly anticipated IPO definition of crude oil in french next yr. But it additionally unveils a wider Aramco technique no other state-owned oil big has pursued yet: shopping for up downstream refineries worldwide to ensure steady client access regardless of costs.
In the most recent deal, finalized Monday, Aramco gained full ownership of Port Arthur and 24 distribution terminals in a boon to buyers eyeing the IPO. Before that, Aramco had a 50-50 stake within the refinery with Anglo-Dutch oil large Royal Dutch Shell. Petroleum Refinery Equipment For Sale Port Arthur, referred to as the “crown jewel” of U.S. refinery infrastructure, can process 600,000 barrels of oil a day.
Aramco is slated to go public next yr and the government is hoping the IPO can web $2 trillion — the largest IPO in historical past by an extended shot — to attain some sorely needed cash. “This Port Arthur deal is about Saudis getting prepared to try to worth Aramco at the very best amount they can before they go public,” mentioned Andrew Holland, an energy professional at Washington-based mostly assume tank American Security Mission.
Saudi Arabia and other petro-states are feeling the pain definition of crude oil in french from report-low oil prices, squeezing their regular streams of authorities revenue. The U.S. market is among the few vibrant spots for Saudi Arabia, the United States’ second-largest oil supplier after Canada. The Gulf kingdom exported 1.3 million barrels of crude a day to the United States in February, up 32 p.c from last yr.
This isn’t the first downstream refinery Aramco purchased, and it won’t be the last. Aramco additionally purchased up refineries in China, Japan, Indonesia, South Korea, and is exploring expensive new ventures in Malaysia and India.
That’s all a part of a grand plan, stated Jean-Francois Seznec, a 25-year power industry veteran now with Georgetown College. As the sole state-owned oil company within the world’s largest petro-state, Aramco has a firm grip on its upstream enterprise, so now it’s locking down management of downstream markets, he informed FP. “They’re creating a baseload of demand for his or her crude production so Saudi oil will all the time have an outlet to promote in regardless of prices,” he mentioned. “I assume it’s a excellent strategy…no different national companies appear to have the identical strategy.”
A Saudi state firm controlling the biggest U.S. refinery may sound like a nationwide security headache, however specialists say it’s not. The issue moderately is certainly one of notion.
“The optics aren’t good,” mentioned Bud Coote, a former vitality analyst for the CIA and now with Washington-based mostly assume tank the Atlantic Council. “But the [oil] industry’s globalization and interdependence could quell any alarm,” he mentioned, including Aramco seemingly wouldn’t danger any access to U.S. markets for Riyadh’s political positive factors. And U.S. relations with Saudi Arabia are much better than with other petro-states world wide, similar to Iran, Russia, or Venezuela.
Not like Russia’s state-owned power firms, which the Kremlin wields as a blunt geopolitical weapon in opposition to power hungry neighbors, Aramco has never put politics above industrial interests, Holland stated. And the Saudi Royal household, which controls all points of the country’s government, is conspicuously absent from Aramco’s leadership.
“There will not be a single member of the royal family in Saudi Aramco, not one,” Seznec mentioned.
“Not even on board of administrators.”
If there are issues over the deal, nonetheless, they can be addressed by way of the Committee on International Investment in the United States (CFIUS), an interagency panel that has the facility to halt international transactions that threaten nationwide security.
U.S. President Donald Trump appears to have backed off repeated marketing campaign guarantees to wean the United States off overseas energy. In campaign speeches, Trump vowed to achieve independence from “our foes and the oil cartels” (presumably referring to the Group of the Petroleum Exporting Countries, of which Saudi Arabia is a member), and threatened to curb Saudi crude imports if Riyadh didn’t pitch in more troops to the struggle in opposition to ISIS.
Trump has since backed away from these statements, and U.S.-Saudi relations seem like flourishing primarily based on latest bilateral meetings. So, at least for now, the newest Aramco deal could also be a win-win situation for Washington and Riyadh.