SAUDI ARABIA FORGES CLOSER TRADE TIES WITH SOUTH KOREA

Saudi Aramco is forging closer business and investment ties with South Korea, attracted by its technological prowess and world-class companies.

In June, Aramco signed a slew of contracts with Korean companies, including S-Oil in a bid to advance its global chemicals strategy, with the launch of a new Residue Upgrading Complex and Olefin Downstream Complex.

The new facilities feature the latest refinery technologies, which have raised S-Oil’s petrochemical portion from 8% to 13%, and includes high-value products such as propylene and gasoline. Aramco Overseas Company is a major shareholder in S-Oil, South Korea’s third-largest refiner.

“These two new facilities will supply high-value products to major Korean industries, whose global brands are part of our everyday lives and rank among the world’s very best in technology, innovation, creativity, and quality,” said Saudi Aramco president and CEO Amin Nasser.

The two companies also signed a memorandum of understanding to work together on a USD 6 billion steam cracker and olefin downstream project, with a completion date of 2024.

That was just the tip of the iceberg. Saudi Arabia also signed 12 agreements with other South Korean companies to reinforce its relationship with South Korea and support Asia’s energy security through Saudi crude oil supply.

“Only a few decades ago, Korean companies played a vital role in Saudi Aramco’s upstream offshore growth development,” according to Nasser. “Since then, they have moved into other sectors matching Saudi Aramco’s diversification strategy. Today’s agreements mark a new era of co-operation with our Korean partners who will play an increasingly important role in our strategy to capitalise on new initiatives that include long-term energy supply, maritime and infrastructure development, and breakthrough research and development in the automotive, crude-to-chemicals, and non-metallic sectors.”

Some of the other agreements included a deal for Saudi Aramco to supply Arabian crude oil to Hyundai Oilbank. A memorandum of understanding was also signed with Korea National Oil Corporation, which will allow Saudi Aramco to explore the potential of crude oil storage in South Korea to complement its marketing and supply activities.

Other agreements included a joint venture between Hyundai Heavy Industries and The Saudi Arabian Industrial Investments Company, an Aramco unit, for an engine manufacturing and aftersales facility in Saudi Arabia.

Aramco is heavily investing in technologies in its bid to stay at the forefront of technological advances in the industrial sector. In this respect, the company opened a Baker Hughes GE (BHGE) research facility at Dhahran Techno Valley in June.

“This centre will be a game-changer in ways that many of us would have considered ‘science fiction’ at the beginning of our careers,” said Saudi Aramco’s vice president of Petroleum Engineering & Development, Nasir Al Naimi, as he welcomed guests and a BHGE management delegation led by CEO Lorenzo Simonelli to the Dhahran Techno Valley.

In early July, the Organization of Petroleum Exporting Countries’ (OPEC) and its allies agreed to extend their voluntary production adjustments for an additional nine months to 31 March 2020.

OPEC countries have taken major steps to stabilise the oil market over the past 30 months, and have had significant success in bringing down inventory levels. Thanks to OPEC action, Brent crude prices have risen 18% in the first six months of the year.

“The importance of this cannot be overemphasised given the extreme severity of the downturn the industry faced in 2014-2016. The five-year average for OECD commercial stock levels reached a record high overhang of more than 400 million barrels in July 2016,” said Manuel Salvador Quevedo Fernandez, Venezuela’s people's minister of petroleum, and president of the OPEC Conference. “In May 2019, the overhang in OECD commercial oil stocks has been reduced to 25 million barrels.”

Meanwhile, the OPEC’s latest forecast on global crude oil demand shows strong growth in the near-term.

The group predicts world oil demand will grow by 1.14 million barrels per day (bpd) in 2020. Demand in developed economies is forecast to grow by 0.09 million bpd next year, with only developed North America showing positive growth, while developed Europe and Japan will see a decline in demand.

Growth will largely be driven by emerging economies of Asia, which are projected to be the largest contributor to incremental oil demand in 2020.

“Factors that could influence the pace of oil demand growth in 2020 include macroeconomic developments in major consuming countries, the displacements of heavy distillates with natural gas and other fuels, subsidy programmes and plans for their removal, the effect of commissioning/delays/closures of mega projects in the downstream and fuel efficiency programmes, especially in the transportation sector,” OPEC said.