These five Gulf oil firms have shifted focus to trading units

Since oil prices have more than halved since June 2014, five of the largest oil companies in the Gulf have shifted their focus to setting up, or strengthening their own trading units in an effort to diversify revenue streams. Saudi Arabia and Oman were among the first in the region to establish a separate entity for trading, while Abu Dhabi is said to be in the process now.

As crude prices continue to hover around $50 a barrel, these units could help provide the national oil firms some protection from price volatility and maximize their profit from each barrel of oil, BMI Research said in a report. “However, this will take time as fostering the skills, contacts and knowledge to succeed in energy trading takes many years to build up and master,” the consultancy said.

Argaam has compiled a list of the state-run oil companies below. 

1) Abu Dhabi National Oil Co. (ADNOC) is considering its own trading unit and might opt for a joint venture with another oil firm or trading house, Reuters reported last month. Royal Dutch Shell and Vitol are said to be in talks with ADNOC. The state-run oil firm recently also announced a number of revamps to the company, including plans to IPO minority stakes in its services businesses and dividing its offshore oil concession.

“Our forecasts show that Emirate (Abu Dhabi) will nearly triple its refined products exports in 2020 as al-Zour refinery becomes operational, providing opportunities to become a regional player in the refined fuels trading,” BMI Research said.

2) Kuwait Petroleum Corporation (KPC) in July said it was considering setting up an offshoot commercial firm that will trade in petroleum products, Kuwait’s state news agency KUNA reported. If approved, the new company would not exercise speculations on international petroleum stocks, Imad Al-Abdulkareem, acting managing director for global marketing, was quoted as saying. "The company will focus on maximizing the added value of KPC's hydrocarbons production," Al-Abdulkareem said.

3) Iraq’s Oil Marketing Company (SOMO) earlier this year came together with Russia’s Litasco – the trading arm of Lukoil – to form a joint venture. “The aim behind the contract is to transform the company to a commercial company (that) contributes in selling the Iraqi oil,” a statement on Iraq’s Ministry of Oil website said, citing SOMO’s director general Falah Al-Ameri. SOMO auctions its crude via Dubai Mercantile Exchange, and has sold a total of 10 million barrels through DME auctions since April of this year.

4) Saudi Arabian Oil Co. (Saudi Aramco) created a trading division for refined products and petrochemicals in 2012. The Saudi Aramco Products Trading Co. does not have any external partner, and trades about 1.5 million barrels of refined, liquid chemical, and polymer products every day across the world. In 2016, a total of 1,190 shipments were made for petroleum products, according to the company’s statistics.

In April this year, the trading unit launched its own website.

5) Oman Trading International (OTI) was established in 2006 in partnership with Vitol, a global energy and commodity trading company, to trade oil, petroleum products and petrochemicals in the global market. In 2015, Oman bought Vitol’s stake, making OTI 100 percent state-owned. According to the company’s website, it trades an average of 15 to 20 million tons of energy products per year.

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com