Saudi Arabian Oil Stock

Saudi Arabian Oil Company operates as an integrated oil and gas company in the Kingdom of Saudi Arabia and internationally. The company’s portfolio of leased assets mainly comprises drilling rigs, marine vessels, industrial facilities, equipment, aircraft and vehicles.

Segments

The company operates through two segments, Upstream and Downstream.

The Upstream segment’s activities consist of exploring for, developing and producing crude oil, condensate, natural gas and gas and natural gas liquids (NGLs). The company’s principal fields are located in close proximity to each other within the Central and Eastern Provinces of the Kingdom. An extensive pipeline network connects Saudi Aramco’s fields, processing plants and other facilities. The crude oil, condensate, natural gas and NGLs produced travel through Saudi Aramco’s pipelines to multiple facilities for processing into refined products or to domestic customers or export terminals. In particular, the company’s East-West pipeline is critical in linking oil production facilities in the Eastern Province with Yanbu’ on the west coast, and providing flexibility to export from the east and west coasts of the Kingdom. As at December 31, 2019, the company’s MSC was 12.0 mmbpd of crude oil. The company is the exclusive supplier of natural gas in the Kingdom and its gas portfolio is rich in liquids, demonstrated by its production of unblended condensate and NGLs as byproducts of its crude production. The company owns and operates the Master Gas System (MGS), which is an extensive network of pipelines that connects its key gas production and processing sites throughout the Kingdom.

The Downstream segment activities consist primarily of refining and petrochemical manufacturing, supply and trading, distribution and power generation. The company has a large, strategically integrated global downstream business. The Downstream segment’s activities consist primarily of refining and petrochemical manufacturing, supply and trading, distribution and power generation. The strategic integration of the company’s Upstream and Downstream segments provides an opportunity for Saudi Aramco to secure crude oil demand and capture incremental value from the oil supply chain by selling to its dedicated system of domestic and international wholly owned and affiliated refineries. The Downstream segment’s other business activities include base oils, lubricants and retail operations. The company’s downstream business is the single largest customer for the Upstream segment’s crude oil production, consuming 38% of its crude oil production in 2019. The company’s upstream business produces all the crude oil supplied to and processed by its wholly owned and affiliated refineries in the Kingdom and the majority of crude oil used by its international wholly owned and affiliated refineries. The company’s refining operations in the Kingdom, including its domestic affiliates and local distribution system, provide Saudi Aramco unique access to the large domestic marketplace to which it is the sole supplier. In addition to its domestic focus, Saudi Aramco is focusing its downstream investments in areas of high growth, including China, India and Southeast Asia, material demand centers, such as the United States, and countries that rely on importing crude oil, such as Japan and South Korea.

In 2019, Saudi Aramco continued to grow its fuel retail presence through its affiliates. Saudi Aramco has continued to supply refined products to more than 17,000 service stations worldwide with 5,300 located in the U.S., more than 5,200 in China and South Korea, 6,500 in Japan and 270 service stations in Saudi Arabia. In February 2019, Saudi Aramco grew its service stations business and increased its access to in-Kingdom retail customers by entering into a 50:50 joint venture with Total to operate service stations in the Kingdom. The company and Total also entered into an agreement to acquire a network of 270 service stations and a fuel tanker fleet in the Kingdom under the Sahel brand name. The transaction closed in June 2019. As at December 31, 2019, the company had a net and gross chemical production capacity of 21.7 million (2018: 16.7 million) and 46.1 million (2018: 33.2 million) tonnes per year, respectively.

In 2019, through its wholly owned subsidiary, Motiva Chemicals LLC, the company acquired 100% of the equity interest in Motiva Chemicals LLC. Motiva Chemicals LLC owns and operates a chemical plant located in Port Arthur, Texas, comprising a mixed feed cracker, a cyclohexane unit, a benzene unit, NGL and ethylene pipelines and storage facilities.

The company also has an integrated petrochemicals business within its Downstream segment. Its chemicals business spans from production of basic chemicals, such as aromatics, olefins and polyolefins to more complex products, such as polyols, isocyanates and synthetic rubber. The company’s Downstream segment includes its crude oil and product sales, distribution and trading platforms. These platforms support Saudi Aramco’s upstream and downstream operations by enabling it to optimize crude oil sales and product placement through its significant infrastructure network of pipelines and terminals and access to shipping and logistics resources. The company’s downstream investments diversify its revenue by integrating its oil and gas operations to optimize value across the hydrocarbon chain.

The company operates a strategically integrated global downstream business. Its downstream activities consist primarily of refining and petrochemical manufacturing. Other activities include base oils, lubricants and power generation.

The company’s Kingdom-wide distribution network includes pipelines, bulk plants, air refueling sites and terminals that deliver crude oil, NGL, natural gas and refined products. In particular, the company’s East-West pipeline is critical in linking oil production facilities in the Eastern Province with Yanbu’ on the west coast, and providing flexibility to export from the east and west coasts of the Kingdom. In both 2018 and 2019, the East-West pipeline transported an average of 2.1 mmbpd of crude oil. The company’s MGS, an extensive network of pipelines that connects its key gas production and processing sites throughout the Kingdom, is undergoing an expansion. The system’s current capacity is 9.6 bscfd of natural gas supplying Eastern, Central and Western industrial complexes.

In addition, the company has a 15% equity interest in the Arab Petroleum Pipeline Company (Sumed Company), a joint venture which operates the Sumed pipeline. The pipeline runs from the Red Sea to the Mediterranean Sea through Egypt and provides an alternative to the Suez Canal. The company supplies oil products to customers throughout the Kingdom, which provides it with reliable demand and allows for high utilization of its domestic refining system. The company produces and sells.

The company manages crude oil sales operations, along with a large and growing portfolio of refining and chemicals facilities, in the three major markets of Asia, Europe, and North America. As part of its strategy to unlock additional value, the company is expanding into crude oil, refined products and chemicals trading and is seeking to significantly grow its total traded volumes over the next few years.

In 2019, the company traded an average of 4.5 mmbpd (2018: 4.0 mmbpd) of crude and refined petroleum products, 2.2 million tonnes of liquid chemical products (2018: 1.6 million tonnes) and 1.4 million tonnes of polymers (2018: 715 thousand tonnes). In 2019, total crude exports averaged 7.1 mmbpd (2018: 7.3 mmbpd).

As of December 31, 2019, the company’s power operations comprised 16 captive power plants and associated transmission and distribution assets located across the Kingdom. The company owns a 6.9% stake in the Saudi Electricity Company, the Kingdom’s national electricity utility company, and a 24.8% stake in Marafiq, a domestic utility company that serves the industrial areas of Jubail and Yanbu’.

In 2019, the company generated 4.8 gigawatts (2018: 4.8 gigawatts) of power, of which 3.3 gigawatts (2018: 3.5 gigawatts) was used to meet internal demand and the remaining 1.5 gigawatts (2018: 1.3 gigawatts) of spill power was transferred to the national grid.

Distribution

The company delivers upstream production to a external customer base and a dedicated downstream system. Saudi Aramco also provides high-value products to the Kingdom and internationally in large and high-growth markets, through its supply and trading, distribution and retail operations.

In 2019, the company produced 13.2 mmboed of hydrocarbons, including 9.9 mmbpd of crude oil (including blended condensate, and excluding the Kingdom of Bahrain’s share of volumes produced from the Abu Sa’fah field). As at December 31, 2019, the company’s reserves stood at 258.6 billion boe, including 201.9 billion barrels of crude oil and condensate, 25.7 billion barrels of NGLs and 190.6 tscf of natural gas. In addition, as at December 31, 2019, the company had a gross refining capacity of 6.4 mmbpd and net refining capacity of 3.6 mmbpd.

Strategy

The company’s strategy aims to reinforce its competitive positions across its upstream and downstream operations. The key elements of the company’s strategy are to maintain its position as the world’s leading crude oil producer; capture value from further strategic integration and diversification of its operations; expand gas activities in the Kingdom and internationally; expand global recognition of Saudi Aramco’s brands; operate sustainably by leveraging technology and innovation; and deliver sustainable and growing dividends through crude oil price cycles. Its strategy is to introduce its brands to existing domestic and international marketing businesses, including at retail service stations, and further develop its petrochemicals and base oil brands. The company continues to execute its strategy towards becoming a top tier integrated chemicals company through growth, integration, innovation and development of its product portfolio

History

Saudi Arabian Oil Company was founded in 1933.