Saudi Aramco shuts Jeddah refinery indefinitely

Mideast, US crude oil curbs Indian appetite for African supplies

FE Team | Published: November 19, 2017 20:20:32

KHOBAR, Saudi Arabia, Nov 19 (Reuters): State oil giant Saudi Aramco has shut down its 90,000 barrel per day crude oil refinery in Jeddah indefinitely, industry sources familiar with the matter said on Sunday.
Aramco had for years been considering whether to shut the refinery because of age and environmental concerns. The facility, which started operating in 1967, served much of the country's western region and its closure will increase demand at other Saudi facilities.
It produced liquefied petroleum gas, gasoline, diesel, asphalt and jet fuel, and exported naphtha.
One source said the facility would be mothballed. Saudi Aramco did not respond to an emailed request for comment.
The shutdown is not expected to cause a shortage of oil products in Saudi Arabia as Aramco will meet demand from other refineries, industry sources said. In 2014 it brought online two refineries which added 800,000 bpd of refining capacity, in Yanbu on the west coast and Jubail in the east.
On the west coast, Aramco is expected to complete the first major unit of a new, 400,000 bpd refinery in Jizan province by the end of this year.
The Jeddah refinery is next to, and supplies feedstock and power to, a base oil refinery run by Luberef, a joint venture between Aramco and Jadwa Industrial Investment Group.
The closure of the Jeddah refinery will not affect Luberef's production of GI base oil and supply to customers will continue, because Luberef is expanding its GI facilities at Yanbu, the chief executive of Luberef told Reuters in June.
An earlier report from New Delhi adds: India's imports of African crude oil in October plunged to their lowest in over four years, with the world's No 3 oil consumer increasingly turning to cheaper supplies from the United States (US) and heavier Middle Eastern grades, ship tracking data showed.
US crude production has soared more than 14 per cent since mid-2016 to 9.65 million barrels per day (bpd), altering trade routes as its relatively cheap and light grades become a viable import option for Asian refiners.
"Earlier in Asia, West African oil was competing with Middle East grades, but now it has a new competitor: the US," said Ehsan Ul-Haq, director of crude oil and refined products at consultancy Resource Economist.
Surging US crude output has made West Texas Intermediate (WTI)-linked American oil relatively cheap compared with the international benchmark, Brent, which has been propped up by supply cuts led by the Oorganisation of the Petroleum Exporting Countries (OPEC).
WTI has since October been trading at an average discount of $6 per barrel to Brent.