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French Total to enter Saudi downstream business

Berry Group / Energy  / French Total to enter Saudi downstream business

French Total to enter Saudi downstream business

By Dr. Cyril Widdershoven – Berry Commodities – Global Head of Strategy & Risk

Saudi Aramco is currently mainly in the news with regards to multibillion investment schemes in Asian markets, showing an increased appetite to lock in demand for Saudi crude in China, Pakistan and India. But make no mistake, local ventures could be making headlines again very soon.

In the last couple of days, news has popped up that Aramco and French oil major Total, through its Satorp joint-venture, Sumitomo Mitsui Banking Corporation and Riyad Bank to help raise funds to develop a petrochemical facility in the kingdom. The parties are asked to assist with the financing of the $5 billion Admiral project, which is going be in Jubail in the Eastern Province. Satorp already operates a refinery and will convert fossil fuels into building blocks for plastics. This new project is a logical step forward in the Saudi plan to diversify its oil-dependent economy and turn it into a more sustainable economy. Part of this move is to expand the petrochemicals sector. The Admiral project is expected to have a total production capacity of 2.7 million tons of chemicals per year, and is expected to come onstream by late 2023 or early 2024.

Looking at the success story of Total in the UAE (ADNOC), this Saudi move could be very important. It also could increase Aramco?s knowledge and access to upstream gas technologies and capabilities which are much needed to support the future target of self-sufficiency or even the Saudi dream of becoming a net-gas exporter.

The possible announcement of this downstream/retail deal was already a rumor at the end of 2018. At that time, Aramco stated that it had established a domestic fuel retailing subsidiary as part of the national oil company?s drive to expand beyond crude oil production into downstream businesses.

The set-up of this new company, Saudi Aramco Retail Co, has been supported by a feasibility study by Total. The latter was asked to evaluate the feasibility of jointly buying a retail service station network in Saudi Arabia. In December Total was not mentioned by Saudi officials, but now things seems to be heading towards the introduction of a Total retail network in the Kingdom too.

By Dr. Cyril Widdershoven for Oilprice.com

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