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Saudi Aramco offers struggling refiners sweeter terms for crude

April 16/2020

MOSCOW (MRC) -- Saudi Aramco has offered oil refineries in Asia and Europe the option to defer payments for crude cargo deliveries by up to 90 days as plants struggle with shrinking demand, reported Reuters with reference to refining industry sources.

The credit terms, which Saudi Arabias national oil company has offered through unnamed Saudi banks, are also seen as part of the countrys efforts to increase its market share, the sources told Reuters.

Aramco are asking us to amend our existing agreement to include a bill of exchange which will give you basically an opportunity to pay through a bank in 90 days time, one source at an Asian refiner said.

Under the terms, Aramco will receive the payment for the cargoes from the same bank within 21 days of shipment, he said.

Saudi Aramco declined to comment.

The new terms, offered to at least four refiners in Asia and Europe, could alleviate the short-term financial burden for refineries, which have struggled with a collapse in oil demand around the world due to coronavirus-related movement restrictions.

They will however lead to overall higher costs due to more expensive financing terms, according to sources at the refineries.

As a result, at least three refineries have rejected the terms, the sources said.

It is... useful for people who are actually looking at rolling or rotating money (but) it comes at a cost. We are actually trying to reduce our overall cost, the first source said.

The Organization of the Petroleum Exporting Countries, along with Russia and other oil producers - a group known as OPEC+ - last week joined with other producing countries, including the United States, for an agreement which is set to remove a total of around 19.5 million barrels per day (bpd) from the market in the face of the demand collapse.

The agreement followed a sharp drop in oil prices to below USD20 a barrel after Saudi Arabia and Russia launched a price war to try to increase their market share after ending a four-year production cut deal.

Following the OPEC+ deal, Saudis agenda remains broadly intact in as far as maintaining pressure on U.S. and international oil companies while continuing its passive-aggressive price war with other producers, said Christyan Malek, JPMorgans top European oil and gas analyst.

As MRC informed before, Saudi Aramco will continue reducing operations at its local refineries in April and May to boost the state energy companys potential to export crude oil, a company official said in March.

We also remind that in October 2019, McDermott International announced that it had been awarded a contract by Saudi Aramco and Total Raffinage Chimie (Total) for their joint venture (JV) Amiral steam cracker project at Jubail, Saudi Arabia. Amiral is a JV in which Aramco holds 62.5% and Total the rest. The plant, designed to produce 1.5 million metric tons/year (MMt/y) of ethylene, will be one of the world's largest mixed-feed crackers.

Aramco and Total launched their USD5-billion Amiral JV project in October 2018. The steam cracker will be fed with a mixture of 50% ethane and refinery off-gases. It will supply ethylene to a downstream 1 MMt/y polyethylene manufacturing complex and other petrochemical products. The project aims to fully exploit operational synergies with the adjacent refinery, owned by Satorp, another JV between Aramco and Total. Third-party investors, including Daelim and Ineos, will locate plants at the value park adjacent to Amiral with a combined investment of USD4 billion. A final investment decision is expected in 2021.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.

Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.
Author:Margaret Volkova
Tags:PP, PE, LLDPE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, Saudi Aramco, Total Petrochemicals, Russia, Saudi Arabia, USA.
Category:General News
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