* Saudi becomes world's fourth largest oil refiner
* Plans to reach 8 mln bpd of refining would surpass Exxon
* Refining and trading could shift Kingdom's OPEC calculus
By Libby George and Ron Bousso
LONDON, May 22 Saudi Arabia's rapid transition
into one of the world's largest oil refiners adds an extra
dimension to the oil exporter's role as the driver of OPEC
When it attends OPEC's next meeting in two weeks, it does so
with major new state-of-the-art oil refineries that can profit
from cheaper crude and reviving world fuel demand - exactly as
international oil firms have over the past six months.
The kingdom now has stakes in more than 5 million barrels
per day (bpd) of refining capacity, at home and abroard, landing
it a place among the global leaders in making oil products. Its
own target of 8-10 million bpd of refining firepower would
eclipse even ExxonMobil.
"Saudi have moved into the product business in a big way,"
said Fereidun Fesharaki, chairman of FGE energy.
Its oil trading arm, Aramco Trading, could soon find at
least two thirds of its trading focused on products such as
diesel, gasoline and heating oil rather than crude, Fesharaki
Years of investment was designed to fuel the transport, air
conditioning and power generation for the kingdom's economic
growth. But as OPEC members fight for market share, Aramco's
refineries also give it a natural outlet for its 10 million bpd
of crude production.
"In contrast with the crude market which is shrinking, the
product market is becoming more global," said Antoine Halff,
chief oil analyst with the International Energy Agency.
The crude oil price rout this year catapulted refining to
the fore; trading and refining last year soared to 60 percent of
integrated oil companies' first quarter earnings, compared with
18 percent last year, according to Reuters calculations.
While crude oil producers who lack a developed refinery
sector - such as Nigeria - effectively leave this money on the
table for refiners, Aramco and others in the Gulf can now cash
"The crude is so cheap it's pretty much free for them," said
Amrita Sen of Energy Aspects. "The margins are going to be
massive. It makes trade flows in products very different."
Other Organization of the Petroleum Exporting Countries
members, including fellow Gulf states Kuwait and the United Arab
Emirates, have also boosted refining and added trading arms. But
their refineries worldwide, hovering near 1 million bpd each,
are only a fraction of what Aramco has built in just a few
"The Saudis have a much wider market there because they are
competing globally," Halff said. "They diversify vertically by
capturing different parts of the value chain and it becomes a
hedge and it gives them a lot more market access."
Aramco has added more than 1 million bpd in capacity through
a controlling stake in Korea's S-Oil as well as its two heavy
hitting refineries at home, Yanbu and Yasref, both with 400,000
bpd in throughput. Jizan, due on in the Kingdom in 2018, would
add a further 400,000 bpd.
The growth puts Aramco's owned or equity stakes refining at
5.4 million bpd, at least 40 percent above a decade ago. Aramco
itself markets more than 3 million bpd of that, tying it with
Shell as the world's fourth largest oil refiner.
The shift could also enable it to funnel more crude into its
own plants, meaning the nine-year high of 7.89 million bpd it
exported in March could be the high water mark. Already, it has
turned down requests from China for extra crude.
"The volume of crude being sold is still huge," Fesharaki
said. "But it shows the transformation in the next five years in
which the companies become more of product players and will have
automatically less of an influence on the crude market."
(Editing by William Hardy)