The Saudi national oil company aims to significantly expand its operations in the United States at a critical moment in the always uneasy relations between the U.S. and Saudi Arabia.
HOUSTON — The Saudi national oil company is making a bid to significantly expand its operations in the United States at a critical moment in the always uneasy relations between the United States and Saudi Arabia.
The company, Saudi Aramco, aims to strengthen its position on the Gulf of Mexico coast by buying a large oil refinery in the Houston Ship Channel that LyondellBasell is putting up for sale.
And despite geopolitical tensions between Riyadh and Washington, Saudi Aramco sees the potential acquisition as a way to shore up its exports at a time of erosion in the oil business on which the Saudi economy is still largely reliant.
Because of plunging prices, the value of Saudi oil sales has shrunk in recent years. And Saudi Arabia’s archrival, Iran, is becoming a more potent commercial competitor now that it is exporting substantial quantities of crude.
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Four years ago, Saudi Aramco completed a $10 billion expansion of a giant oil refinery in Port Arthur, Texas, in a joint venture with Royal Dutch Shell called Motiva Enterprises. The converted plant is now the biggest producer of gasoline, diesel and other petroleum products in the United States.
This time, Saudi Aramco wants to do a deal on its own. But its negotiations with LyondellBasell, a Dutch company, come as Congress is moving to allow families of victims of the Sept. 11, 2001, terrorist attacks to sue Saudi Arabia for supposed ties between government officials and the terrorists, most of whom were Saudi citizens. The Obama administration has threatened to veto the measure, although an override is possible.
Saudi officials have denied any role in the attacks and have threatened to sell $750 billion in U.S. assets, including Treasury securities, held by the Saudi government, if the congressional measure moves forward.
But energy experts say the quiet bid by Saudi Aramco is designed to further protect its share of the U.S. oil market, even as Washington and U.S. oil companies continue efforts to wean the country off foreign oil.
Saudi Aramco did not respond to questions about the bidding. A spokeswoman for LyondellBasell said she had no comment.
Saudi Aramco is in competition for the Lyondell refinery with Texas-based Valero, as well as two big Canadian companies, Suncor and Cenovus.
Energy experts who have been briefed on the negotiations say that Saudi Aramco is a leading contender and that the price for the refinery could be as much as $1.5 billion.
The Lyondell plant has a capacity to refine nearly 270,000 barrels a day of crude, which could increase Saudi Aramco’s capacity to refine its oil on the Gulf Coast by about 50 percent. The refinery produces not only gasoline and other fuels, but also can also produce feedstocks for petrochemical production.
Imports of Saudi crude have been dropping in recent years, from 1.8 million barrels a day in 2003 to 1.1 million barrels a day this year, largely because of the shale drilling boom in Texas and North Dakota.
“It looks like they are doubling down on their U.S. relationship,” said David L. Goldwyn, who was the State Department coordinator for international energy affairs in the first Obama administration.
“It makes economic sense,” Goldwyn said, “because they want to be a global petrochemical power. And it makes political sense because they see a long-term relationship with the U.S. as the kind of strategic assurance they will be seeking from the next administration.”
The Saudi effort is part of an initiative to expand its refining empire as a way to protect its share of the global market.
Saudi Aramco is also negotiating with CNPC, the Chinese state oil company, for the joint construction of a giant refinery in southwestern Yunnan province. It has investments in other refineries in Japan, China, South Korea and Indonesia.
The effort to focus more financial firepower on global refineries is also part of a larger strategy to diversify investments in areas other than drilling for crude oil on the Arabian Peninsula.
A public offering of at least some refineries is being considered to bolster Saudi Aramco’s financial position, even as the company is making a concerted effort to expand production of refined products, including gasoline and diesel.
The Lyondell refinery, one of the largest in the United States, is designed to process low-quality, high-sulfur crude. In recent years, it has mostly processed Mexican crude and Canadian heavy oil from oil sands, but it could just as easily process low-grade Saudi crude that refineries in Europe and Asia are not designed to refine.
U.S. refineries get a competitive edge on world markets from the low costs of U.S. natural gas that produces power for the plants.