Saudi focuses on Asia
Posted: 23 May 2005
Good business means knowing your markets and your customers, and understanding and meeting their needs.
For Saudi Aramco, increasingly that means sharpening the focus on Asia, a region characterized by a mix of fast-growing markets for energy, such as in China and India, and more developed economies, like Japan, that continue to depend heavily on Saudi Arabian crude.
Abdulaziz F. Al-Khayyal, senior vice president of Refining, Marketing and International, recently visited a number of company affiliates and partners in Asia . In China, he met with high-level officials such as Jia Xi Tai, vice director of the People's Congress of Fujian Province; and Wang Jiming, vice chairman of Sinopec, China's leading petroleum and chemical enterprise.
In Tokyo , Al-Khayyal had an opportunity to meet senior executives from Royal Dutch/Shell, Showa Shell, Nippon Oil, Japan Energy and Sumitomo Chemical.
Finally, in Korea , Al-Khayyal attended the regular meetings of the Board of Directors and Executive Committee of S-Oil Corp., then presided over the naming ceremony of the Alnasl Star, one of Vela International Marine Ltd.'s new product carriers.
Al-Khayyal's assessment following his trip: Saudi Aramco's business in Asia is fundamental to fulfilling its commitments as a reliable supplier of hydrocarbon energy and meeting the company's strategic imperative of increasing revenues.
" Asia has been and will continue to be one of our highest realization markets," Al-Khayyal explained. "We want to remain in our three major market enclaves of Asia , Europe and North America since all are strategically important," he said, "but send a higher percentage of our exports to the Asian markets."
Strategic Plans
When it comes to maximizing revenue in the future, Asia is a key component of Saudi Aramco's strategic plans. "To ensure the long-term placement of Arabian crude oil," Al-Khayyal said, "we've embarked on a series of joint ventures in Asia to find dedicated outlets for our crude oil."
Saudi Aramco's foray into Asia began in 1991, when a subsidiary purchased a 35-percent interest in SsangYong Oil Refining Co., now S-Oil, in Korea . Next came a 40-percent stake in Petron in the Philippines . More recently, a subsidiary has been working on a joint-venture refining and petrochemical project in China 's Fujian Province with affiliates of Sinopec and ExxonMobil.
In the past year, a subsidiary concluded a new partnership in another key Asian market, buying an equity stake of about 10 percent in Japan 's Showa Shell Sekiyu K.K., an agreement with a supply commitment of 300,000 barrels per day (bpd) of crude oil. The stake in Showa Shell is expected to grow to about 15 percent this year.
In 2004, Saudi Aramco also signed an agreement with Sumitomo Chemical, a major Japanese petrochemical manufacturer, to study the conversion of the topping refinery at Rabigh into a world-class petrochemical complex.
And, according to Al-Khayyal, a subsidiary is currently in talks for another joint-venture project with Sinopec to build a 200,000 bpd grass-roots refinery in Qingdao . Sinopec is already partnering with Saudi Aramco in a nonassociated gas exploration and production project in the Rub' al-Khali.
These partnerships are both long-term and strategic in nature. "In capturing growth," Al-Khayyal said, "we want to make it a strategic, long-term capture. That is why we enter these joint ventures and why we are always eager to look at opportunities in growth markets such as China and India ."
In addition to bolstering revenues for Saudi Arabia and providing greater energy security for Asian consumers, in many cases these joint-venture projects offer benefits to the Kingdom's local economy. For example, the Rabigh petrochemical project with Sumitomo - expected to produce 2.2 million tons of olefins annually, along with large volumes of gasoline and other refined products - creates third-party investment opportunities for utilities and related infrastructure.
Domestic Projects
"Sumitomo is a good example of the kind of investor we are looking for," Al-Khayyal said, "and that could be repeated.
"There is interest in Asia in our domestic projects," he noted, "and firms in Asia have been invited to participate." Saudi Aramco's New Business Development organization has had encouraging talks with some prospective Far Eastern investors, he said. "They have to meet both the commercial and strategic objectives for these projects, and some Asian investors will be able to do that."
Booming demand for energy in the Asia-Pacific region has been a major factor in energy markets in recent times, and indications are that the growth will be long-term. For example, the International Energy Agency predicts that China's crude oil demand will surge from roughly 5 million bpd today to 12 million bpd by 2030, while demand in other East Asian countries will more than double in the next quarter-century, to 9.4 million bpd.
"There is growth in demand in Asia , and Asia continues to depend on imported energy, and in particular oil from the Middle East ," Al-Khayyal said. "Growth will be solid, and it will continue. If you look at China and its consumption rates for both commodities and manufactured goods, you will see they have a lot of room to grow in order to catch up with the developed world. They want access to basic raw materials, and to energy. These deals provide both energy and feedstocks for petrochemicals.
"We're going to work to do our part to meet this growing demand," Al-Khayyal added. "We can't be the only ones to act as a supplier, but we want to be the preferred supplier. We can and will deliver the needs of our customers."
End-Users' Needs
Al-Khayyal said his trip reaffirmed that Saudi Aramco is held in high regard in Asian energy circles, saying he heard nothing but superlatives about the company and its employees during his trip.
"It's testing sometimes to hear this," he said, smiling, "because I wonder how we can improve. This reputation is the product of many years of hard work and dedication. We've been dealing with some of these companies for many decades, and respect for Saudi Aramco is passed on from their managers to their subordinates. A lot of people in our company have contributed to this assessment. These firms view their relationships with Saudi Aramco as not only commercially beneficial but also strategically important. We should be proud of that."
Understanding end-users' needs, as well as the requirements of the company's Asian partners, is important for Saudi Aramco's long-term business potential in Asia , Al-Khayyal said.
"Look at our students in China , Korea and Japan ," he said. "These young people are a long-term investment, as it will be years before they move into the managerial ranks."
The RM&I business line is sponsoring 25 students who are being educated in China , 12 in Korea and four in Japan .
As Asia 's demand for energy increases, so will the importance of Saudi Aramco's role as a reliable supplier. The company's ability to perform that role depends not only on its massive reserve base and sophisticated physical infrastructure, but also the commitment of its people and the close, mutually beneficial relationships Saudi Aramco has forged in the region.
As Al-Khayyal stressed, "We are driven by our need to understand our customers and their needs, and to be better able to serve them."
Posted by Editor Pipeline Magazine
Information supplied by companies
or PR agencies who are responsible for content. Send press releases
to info@pipelinedubai.com |
