Aramco plans to buy non-Saudi crude in global trading expansion

By Anthony DiPaola on 9/19/2017

DUBAI (Bloomberg) -- Saudi Aramco plans to expand its trading business by buying and selling non-Saudi crude as the world’s biggest exporter prepares for what could be a record initial public offering.

The state-owned company is putting crude marketing and refined-product trading under the same management, according to Ibrahim Al-Buainain, chief executive officer of Saudi Aramco Products Trading Co. The enlarged unit will trade crude that it doesn’t own, helping Saudi Aramco supply refineries more efficiently and make more profit, he said.

“We’ll keep selling our own oil as normal, and we want to get into trading third-party crude,” Al-Buainain, who will head the expanded unit, said in an interview in Fujairah in the United Arab Emirates.

Aramco is joining other state-controlled oil companies in taking a greater interest in trading crude and not just supplying it. The move comes as the kingdom prepares to sell about 5% of Aramco. The government has previously said the valuation may reach $2 trillion, while analysts, including those at Sanford C. Bernstein & Co. and Rystad Energy, have tended to give lower estimates.

Trading Business

In the Middle East, Iraq formed a joint venture with Litasco SA, the trading business of Russia’s Lukoil, and has sought new markets for its crude by selling on a Dubai-based exchange. Oman started a trading company a decade ago for crude, refined products and petrochemicals, while state producers in Abu Dhabi and Kuwait are considering similar plans.

Putting crude marketing and refined-product trading under the same umbrella is a shift in policy for Aramco, which set up its fuels unit as a wholly owned subsidiary five years ago. Aramco will continue selling its own oil under long-term contracts to refiners.

“Getting into crude trading is a big departure for Aramco, but it’s something that the oil majors are already doing and making money on,” said Edward Bell, commodities analyst at Dubai-based lender Emirates NBD. “If they want to propose to investors to buy shares, they want to be able to show that they’re at least on par with the biggest international companies.”

Aramco Trading Co., as the fuels-trading business is known, handles about 1.5 MMbpd of refined fuels, about a third of which belong to other companies, Al-Buainain said. In May he had said that ATC was seeking to grab a bigger share of growing markets in Asia and Africa.

Aramco Trading will open an office in Singapore next week during an industry conference in the city state and will eventually trade products and regional crudes there, he said. The company will also expand its London office to better serve the northern European market, Al-Buainain said.

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