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Business News/ Industry / Energy/  Speculation over Saudi Aramco-Reliance oil deal as talks drag on
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Speculation over Saudi Aramco-Reliance oil deal as talks drag on

Saudi Aramco and Reliance Industries have not yet concluded a term contract to import diesel and petrol

While Saudi Arabia is the world’s top crude exporter, a lack of refineries to process crude into fuel products has meant the kingdom has traditionally relied on imports, largely from Asia. Photo: BloombergPremium
While Saudi Arabia is the world’s top crude exporter, a lack of refineries to process crude into fuel products has meant the kingdom has traditionally relied on imports, largely from Asia. Photo: Bloomberg

Singapore: Saudi Aramco and Reliance Industries have not yet concluded a term contract to import diesel and petrol, three people from the industry familiar with the matter said, fanning market speculation that the long-standing annual deal may not be renewed.

A deal has normally been signed by the first quarter, but negotiations have gone on longer at a time when Saudi Arabia has become less reliant on imports following refinery expansions.

The term deal talks had stalled because the companies had not been able to agree a price yet, said the people who were familiar with the negotiations.

“Even if the Saudis don’t import from Reliance, Reliance will be able to sell in the domestic market due to firm summer demand and low underlying crude oil prices," said one person.

Reliance and Saudi Aramco could not immediately be reached for comment.

While Saudi Arabia is the world’s top crude exporter, a lack of refineries to process crude into fuel products has meant the kingdom has traditionally relied on imports, largely from Asia.

But a person from the industry who supplies products to Saudi Arabia said a deal might not be reached since there was less logic this year on both sides and Reliance could use the barrels itself particularly given higher freight rates.

If no deal is reached, reduced demand from Saudi Arabia and continued exports from its new refineries would weigh on Asian diesel margins, which are down 26% from the same period last year.

The volumes in the term deal vary, but typically range around 1.5 million to 3.7 million barrels a month of diesel, according to a trader who supplies oil products to Saudi Arabia.

Saudi Arabia added 800,000 barrels per day (bpd) of new capacity in its refineries of Yanbu and Jubail over the last two years, and is planning another 400,000 bpd in Jazan, bringing its total capacity to over 3 million bpd.

The country last year became a net annual diesel exporter for the first time since 2007, according to data published by the Joint Organisations Data Initiative (JODI).

Saudi Arabia exported about 88.8 million barrels of diesel and imported 72.6 million barrels in 2014, the data showed. In 2013, diesel imports were 92.4 million barrels and exports 45.8 barrels.

The country’s petrol imports overtook diesel for the first time in at least three years last December, as its Yanbu refinery is configured to produce mainly diesel, traders said. Reuters

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Published: 16 Apr 2015, 04:44 PM IST
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