Riyadh — Custodian of the Two Holy Mosques King Salman’s visit to Asian countries has further bolstered the Kingdom’s leadership position, strengthened bilateral relations and opened new avenues of investment.
The string of deals signed on the King’s three-week tour to Malaysia, Indonesia, Japan and China also point to a fresh strategy, one to increase Saudi leverage over refined product and petrochemical markets, known as the downstream sector.
“Our strategy is about growth in the downstream,” Amin Nasser, chief executive officer of Saudi Aramco, told Reuters.
“The growth in that sector is very important, and anything integrated between refining, petrochemical, with marketing and distribution, is of interest to us.”
In Kuala Lumpur, Saudi Aramco signed a deal to take a $7 billion investment in a joint venture with Malaysia’s state oil company Petronas in a refinery and petrochemical project known as RAPID (Refinery and Petrochemical Integrated Development).
Under construction in Malaysia’s southern Johor state, RAPID is just across a narrow strait from Singapore, Asia’s oil trading hub. Some 70 percent of the oil for the project, set to start in 2019, will come from Saudi Arabia, giving the Kingdom a key outlet for its crude in Asia, the world’s fastest growing market. It is Saudi Aramco’s largest refinery project outside the Kingdom.
Saudi Aramco also recently made a deal with Indonesia’s Pertamina over a $5 billion expansion of the country’s largest oil refinery, for which Saudi Armaco will supply the crude.
“The investments are intended to enhance Saudi Aramco’s competitive position in Southeast Asia,” Ihsan Buhulaiga, a Saudi economist told Reuters.
The Malaysian investment also allows the Saudis to join the hub of refineries in and around Singapore that help determine fuel prices in the region.
Saudi Aramco’s joint ventures in Malaysia, Indonesia and elsewhere are not only aimed at increasing its refining capacity. Its new deals in the region would also greatly increase its participation in the petrochemical sector, which involves all forms of plastics and where profits have soared thanks to strong demand.
“We have capacity of about 5.4 million barrels per day of participated refining capacity, and our target is to reach 10 million barrels by 2030,” Aramco’s Nasser said.
Ultimately, the big prize is China, where the Saudis signed deals that could be worth as much as $65 billion during the last leg of the King’s Asian tour, covering energy, manufacturing and even a theme park in the Kingdom.
The deals included a memorandum of understanding between Saudi Aramco and China North Industries Group Corp (Norinco) to look into building refining and petrochemical plants in China.
John Sfakianakis, director of the Riyadh-based Gulf Research Center, said that the trip was “the beginning of a long-term strategy of Saudi Arabia to open itself to Asian investors and vice versa” as part of its Vision 2030 policy to diversify its economy beyond crude exports.