* RAPID project secures long-term outlet for Saudi crude
* Expects refined oil products markets to balance by
* Saudi likely to also invest in Chinese refineries - Nomura
By Florence Tan and Reem Shamseddine
SINGAPORE/KHOBAR, Saudi Arabia, Feb 28 Top
global oil exporter Saudi Arabia broke from the pack in the race
to lock up Asian market share after agreeing on Tuesday to pump
$7 billion into a refinery-petrochemical complex in Malaysia,
State oil giant Saudi Aramco's (IPO-ARMO.SE) investment into
Malaysia's RAPID project will secure an outlet for its crude oil
for at least two decades and beefs up its downstream portfolio
ahead of its initial public offering (IPO) next year.
The competition in Asia among producers, including Russia
and other Middle Eastern suppliers such as Iraq, Kuwait and
Iran, is sharp. Asia's growing oil demand provides the only home
for the producers' output, especially as they have lost market
share in the United States to rising domestic shale oil
Buying a share of a large oil refinery with a promise to
provide crude is a time-tested producer tactic for locking up
customers. Russia, the world's largest oil producer, has bought
a major stake in India's Essar refinery and plans to build one
in Indonesia with state-owned Pertamina.
"The investment is wise as it ensures Saudi can increase its
market share in Asia, at a time when rising U.S. shale oil is
displacing Saudi oil from the U.S. market," Gordon Kwan,
Nomura's head of Asia oil and gas research said.
"Being a shareholder of a refinery will give Aramco the
upper hand when competing with other OPEC countries such as Iran
and Iraq, all targeting more oil sales into Asia."
Under the deal with Malaysia's Petroliam Nasional Bhd
(Petronas), Aramco will supply up to 70 percent of the
crude for RAPID, which will consist of a 300,000 barrel per day
(bpd) oil refinery and petrochemical plants.
Aramco has also strengthened its ties with Indonesia,
Southeast Asia's largest economy, providing 270,000 bpd of crude
to the Cilacap refinery owned by Pertamina after taking a 45
The deal "will provide Aramco and the Kingdom a sustainable
demand for the Saudi crude and will allow the companies to add
value to that crude by making high quality products, fuels or
petrochemicals for the Malaysian and neighbouring markets,"
Saudi Energy Minister Khalid al-Falih told Saudi state
Saudi Arabia exported an average of 6.96 million bpd in 2016
to the top six oil buyers in Asia, including China, India,
Japan, South Korea, Taiwan and Singapore, out of total imports
of 31 million bpd, according to Thomson Reuters Eikon data.
The Malaysian deal should bolster Aramco's IPO, which Saudi
officials have predicted will value the company at a minimum of
$2 trillion through the sale of 5 percent stake.
"It's a sound deal and looks good for the IPO. Saudi Aramco
is paying 25 percent of the project's costs and securing the
right to supply 50 percent of its feedstock," industry veteran
John Driscoll, director of Singapore-based consultancy JTD
Saudi Aramco also has refinery ventures in South Korea,
Japan, and China. It also invests Saudi Arabia with
ExxonMobil, Total and Sinopec.
"Longer term, we expect Aramco needs to make more similar
deals, perhaps buying stakes in PetroChina/Sinopec’s refineries
to ensure that they can sell more crude to China and Asia,"
Nomura's Kwan said.
(Reporting by Florence Tan; Additional reporting by Reem
Shamseddine in Khobar, SAUDI ARABIA; Editing by Christian