State-owned Saudi Aramco is targeting greater access for its crude to Mediterranean refineries through a potential arrangement with Geneva-based trading firm Litasco, a subsidiary of Russian private sector oil company Lukoil.
Aramco president Amin Nasser said the preliminary agreement with Litasco could give Saudi crude greater access to refineries in the region "where Russian companies have been expanding." The agreement was inked yesterday, during a Saudi state visit to Moscow.
This year, Aramco's crude exports to the Mediterranean have been running at just shy of 500,000 b/d. The capacity of refining assets in or tied by pipeline to the Mediterranean that are part or wholly owned by Russian firms is substantial — around 800,000 b/d — indicating appreciable notional room for Aramco to grow, if the deal materialises and if it can provide customers.
The largest Russian-owned refinery in the region is Lukoil's 320,000 b/d Isab facility at Priolo, Sicily. But the Russian company has been approached by three potential buyers of the plant and has a declared strategy of concentrating on its domestic operations.
Other Russian assets includes state-owned Gazpromneft refineries in Serbia, through its ownership of NIS. The pair of NIS refineries at Pancevo and Novi Sad processed around 65,000 b/d of crude in 2016. This is well under stated nameplate capacity of the two units of 170,000 b/d. Russian state-controlled firm Zarubezhneft also owns the 60,000 b/d Brod Oil refinery in Bosnia.
State-controlled Rosneft also has stakes in refineries in southern Germany — at Schwedt, Karlsruhe and Neustadt — served by the TAL pipeline from Trieste, Italy. In total Rosneft's share of German refining capacity is around 12pc, equivalent to 250,000 b/d.
Including Priolo this would equate to around 800,000 b/d of maximum refining capacity theoretically accessible from the Mediterranean. None of these refineries are coastal units, but all can be served by pipeline from terminals on the Mediterranean.
Saudi crude arrives in the Mediterranean through the Suez canal, and through the Sidi Kerir oil terminal west of Alexandria, Egypt. The terminal is operated by Sumed, a joint venture between Egypt, Saudi Arabia, the UAE, Kuwait and Qatar. It is connected by pipeline to the Ain Sukhna terminal in the Gulf of Suez where crude is loaded.
Currently, France is the major buyer of Saudi crude in the Mediterranean, taking over 160,000 b/d this year, followed by Italy and Spain at around 120,000 b/d each. Lesser volumes go to Greece, Turkey and Austria.
If consummated, the deal would come at a time when there is a question mark over Litasco's long-term ownership. Lukoil has said it considers the trading arm to be a non-core asset that it might put up for sale. For its part, Aramco plans grow its trading operations by buying and selling non-Saudi crude.
