Saudis take 100% control of America’s largest oil refinery

America’s largest oil refinery is now fully owned by Saudi Arabia.

Saudi Aramco, the kingdom’s state-owned oil behemoth, took 100% control of the sprawling Port Arthur refinery in Texas on Monday, completing a deal that was first announced last year.

Port Arthur is considered the crown jewel of the US refinery system. The Gulf Coast facility can process 600,000 barrels of oil per day, making it the largest refinery in North America.

Aramco previously owned 50% of Port Arthur through a joint venture co-owned with Royal Dutch Shell (RDSA) called Motiva Enterprises.

But the two oil giants had a rocky relationship and reached a deal in March 2016 to separate their assets. Shell put out a statement on Monday confirming the “completion” of that break-up.

In addition to Port Arthur, Aramco is acquiring full ownership of 24 distribution terminals. Aramco also gets the exclusive right to sell Shell-branded gasoline and diesel in Georgia, North Carolina, South Carolina, Virginia, Maryland, the eastern half of Texas and the majority of Florida.

Aramco’s deal allows the oil giant to shore up one of its best customers — the US — ahead of next year’s planned IPO. Now that it controls the largest American refinery, Aramco can send more Saudi crude into the US for refining to sell to North American drivers.

Saudi Arabia is already America’s second-largest source of crude, behind only Canada. The US imported 1.3 million barrels of Saudi crude a day in February, up 32% from last year, according to the Energy Information Administration.

Saudi Arabia is hoping the Aramco IPO will be valued at a stunning $2 trillion. The kingdom continues to grapple with low oil prices and a bloated budget, making it critical that the Aramco IPO goes off without a hitch. Saudi Arabia, the largest oil exporter in the world, dramatically slashed taxes on Aramco in March in an effort to quell concern about the oil giant’s valuation.

Even as Saudi Arabia extends its reach in the US, the Trump administration has pushed for American energy independence by unleashing the domestic energy industry. Trump said in a May 2016 speech that he wants to bring about independence from “our foes and the oil cartels.”

Trump also threatened before he was elected to halt imports of oil from Saudi Arabia and other Arab countries if they didn’t commit ground troops to fight ISIS.

After Trump was elected, Saudi energy minister Khalid al-Falih later warned that blocking the kingdom’s crude could backfire.

For full news: http://money.cnn.com/2017/05/01/investing/saudi-arabia-buys-largest-oil-refinery-port-arthur/

Russian oil major says U.S. shale growth imperils OPEC deal

A recovery in U.S. oil output may deter OPEC and non-OPEC producers from extending production cuts beyond June and might lead to a new price war, Russia’s top oil major said on Monday.

U.S. shale oil production had been in retreat as oil prices tumbled from above $100 a barrel in 2014 to below $30 in 2015, making costly fracking processes less profitable.

A deal by the Organization of the Petroleum Exporting Countries with Russia and other producers to rein in output by 1.8 million barrels per day (bpd) for six months from Jan. 1 lifted prices but also encouraged U.S. firms to boost supplies.

“It became evident that U.S. shale oil output has become and will remain a new global oil price regulator for the foreseeable future,” Rosneft said in a written response to Reuters.

“There are significant risks the (OPEC-led) deal won’t be extended partially because of the main participants, but also because of the output dynamics in the United States, which will not want to join any deals in the foreseeable future.”

Russia agreed to join OPEC supply curbs late last year despite initial opposition from Rosneft’s boss Igor Sechin, one of President Vladimir Putin’s closest allies.

“We think that in the long-term global oil demand dynamics and reduced investment during the period of ultra low prices will balance the market, but that the risk of a price war resuming remains,” Rosneft wrote.

Russia has yet to deliver on the pledged cuts, while Saudi Arabia has cut its production far below the levels it had pledged, compensating for waker compliance by other OPEC states.

Rosneft said it came as a surprise to many observers that OPEC’s compliance with cuts was more than 90 percent, and said the success was because the Saudi position on reducing production had “changed a great deal” from the past.

The kingdom, the world’s biggest oil exporter, had long refused to cut output under veteran oil minister Ali al-Naimi. He was replaced last year by Khalid al-Falih.

“It was Saudi Arabia which initiated the pricing war in the first place with the aim of radically increasing its market share by squeezing out producers of ‘costly’ oil,” Rosneft said, in a reference to shale producers.

“This goal became impossible to reach because of the efficiency and viability of the Russian oil industry,” it added.

Naimi had forecast a collapse in output from Russia’s mature fields. Instead, production has risen in the past two years to an all-time high of 11.2 million bpd, partly because a devaluation in the rouble reduced production costs.

Rosneft said the only guaranteed route to balance the market was for all producers to limit supplies, but acknowledged this would not happen because U.S. shale producers would not join any such pact. U.S. law bars them from such action.

Full news read: http://www.reuters.com/article/us-oil-output-russia-idUSKBN16K1MB

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