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Saudi Arabia's Solution To Rising U.S. Gas Prices

Irina Slav

The first U.S.-bound shipment of reformulated blendstock gasoline produced at a Saudi refinery operated by Aramco and Total is on its way, Reuters reports, citing the official Twitter account of the Aramco-Total joint venture.

The news suggests that with U.S. gas prices at the pump at three-year highs, perhaps this market has proved too potentially lucrative to resist. However, Energy Aspects analyst Robert Campbell noted to Reuters, this also means that Asia is way oversupplied with fuels, so producers need to find alternative destinations for their products.

Aramco and Total have big plans for the Jubail Satorp refinery outside fuel production as well. Earlier this year, the French company signed a US$5-billion contract with Aramco to add a petrochemicals complex to the refinery.

The total cost of the project will be US$9 billion, the partners have estimated, with the complex featuring a 1.5-million-ton ethylene cracker that will feed petrochemical and specialty chemical production facilities in the complex.

The 440,000-bpd Jubail Satorp refinery was built in 2008 and was supposed to produce fuels for the domestic Saudi market to satisfy growing domestic demand. Yet the reforms undertaken by Riyadh, which also include higher prices at the pump, have dented domestic thirst for gasoline.

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This decline could be reversed now that a ban on women driving was lifted. “There will be more cars on the road,” Oil Minister Khalid al-Falih said last month. "Women will be more empowered and more mobile and I think they will participate more in the job market over time, so I think it’s going to contribute to employment of females in Saudi Arabia. A secondary effect will probably be higher gasoline demand.”

Besides the expected growth in domestic demand, Saudi Arabia is focusing on diversifying its export portfolio away from crude oil and into more value-added oil products.

By Irina Slav for Oilprice.com

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