Global downstream

Our partnerships in refining and marketing ventures in China, Japan, South Korea, and the United States enable us to traverse the length of the value chain from wellhead to consumer, adding value to our resources at every step.

In 2016, we continued to pursue and evaluate international opportunities to expand our refining and chemicals capability for greater downstream integration to propel additional value creation.

South Korea

In South Korea, we hold a majority equity interest in S-Oil, one of the country’s leading refiners. Two projects are underway to enhance its refinery’s competitiveness, create a more diversified portfolio, and improve profitability.

The first project involves upgrading low-value residue to high-value olefin and gasoline products. The second project involves new facilities to produce polypropylene and propylene oxide, and recover ethylene.  

Indonesia

In Indonesia, we have been selected as the strategic partner for the Refinery Development Master Plan Project of Pertamina, the national oil company. In 2016, we signed a nonbinding Joint Venture Development Agreement to enable further progress for the joint ownership, upgrade, and operation of Pertamina’s Cilacap Refinery in Central Java.

Under the agreement, the refinery’s capacity will be expanded to 400,000 bpd and designed to process Arabian crude oil to produce refined products that meet Euro V specifications, basic petrochemicals, and Group II base oil for lubricants. Saudi Aramco will own a 45% interest of the venture. Basic engineering design work was completed in early 2017. 

United States 

In the United States, a nonbinding Letter of Intent was signed by our Houston-based indirect subsidiary, Saudi Refining Inc., and an affiliate of Shell Oil to end the Motiva Enterprises LLC refining and marketing joint venture formed by the parties in 1998 (“Motiva”), and to divide the assets of Motiva between them.

Subject to the completion of definitive agreements and the receipt of regulatory approvals of the definitive agreements, Saudi Refining Inc. and its affiliate, Aramco Financial Services Company, will own 100% of Motiva and the assets retained by Motiva, including full ownership of the Motiva Refinery in Port Arthur, Texas and certain distribution terminals.

The definitive agreements also include an exclusive license to use the Shell brand to sell certain products across much of Texas and the Southeast.

Netherlands 

In the Netherlands, we officially launched Arlanxeo, our joint venture with German specialty chemicals company LANXESS, a milestone on our journey to increase our participation in the chemicals sector.

Arlanxeo is a world leader in the development, production, marketing, sale, and distribution of synthetic rubber and elastomers used in the global tire industry, auto parts manufacturing, construction, and oil and gas industries.

The joint venture helps unlock the full economic potential of the Kingdom’s hydrocarbon resources, and potentially enables opportunities for further economic diversification and job creation. 

FREP

In China, our crude oil exports account for nearly 10% of the country’s demand. Our portfolio of downstream assets in China is designed to benefit energy and feedstock consumers and maximize returns on the Kingdom’s hydrocarbon resources. In the Fujian Province, we have an equity ownership in a joint venture called the Fujian Refining and Petrochemical Company Limited (FREP).

FREP is our joint venture with ExxonMobil, China Petroleum and Petrochemical Company Limited (Sinopec) and the Fujian provincial government. It is a key element in our Asia chemicals strategy and is long recognized for its outstanding environmental performance by the local community and government.

Growing sales and marketing

Expanded sales and marketing activities are key components of our strategy to strengthen integration across our downstream business and create additional value while diversifying risk. Guided by this approach, we registered eight new customers in 2016 and explored sales opportunities in the Baltics, Africa, Australia, and New Zealand. We also renewed our agreement for the Okinawa storage facility to support supply and distribution in Asia and are working to expand storage capacity by 2 million barrels, to 8.3 million barrels, by mid-2017.

In 2016, we signed key business principles with the Jadwa Industrial Investment Group and LUBEREF, our affiliate that operates two base oil refineries in Jiddah and Yanbu’ on the Kingdom’s Red Sea coast, for the right to lift and market the base oil produced at LUBEREF. Base oils are used to create lubricants for automotive, industrial, and marine applications.

We plan to integrate base oil producing affiliates and establish global base oil product slates under the Saudi Aramco brand for Groups I, II, and III, with the capacity to produce 4.7 million tons per year, representing 14% of global base oil demand. In late 2016, our sales and marketing subsidiary, Aramco Trading Company (ATC), began volume exports of Group I base oil under the new brand name aramcoDURA®.

In addition to commencing exports of aramcoDURA®, ATC celebrated five years of successful operations and remained focused on creating more value from trading operations and maintaining reliability and profitability from our refined products portfolio. ATC pursued efficiency gains by optimizing freight contracts, hiring a new lead logistics provider, and increasing the number of local and international hubs to offer greater storage options and shipping flexibility.

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