[INTERVIEW] Asia is pivotal market for oil, Aramco executive says

Saudi oil supplier Aramco aims to diversify its downstream operations. The company has made major investments in Asian businesses, including Korea's $7 billion Shaheen project.

Aramco Downstream President Mohammed Y. Al Qahtani [ARAMCO]

DHAHRAN, Saudi Arabia — As nations worldwide strive to go carbon neutral, Aramco looks to place its eggs in different baskets with a string of major investments in downstream operations.

Downstream operations involve processing crude into finished products, while upstream activities center on the production of crude oil.

Mohammed Y. Al Qahtani, Aramco's president of downstream, believes that Asia is a pivotal market in the Saudi oil supplier’s efforts to diversify its downstream portfolio in expectation of an uptrend in petrochemical demand.

“We are embarking on a huge program for liquids-to-chemicals with the target of converting 4 million barrels of liquids into chemicals [per day by 2030],” said Al Qahtani during a Dec. 4 interview with press at Aramco’s headquarters in Dhahran, Saudi Arabia.

The $7 billion Shaheen project in Ulsan, which broke ground in March, is a prominent example among Aramco’s series of downstream investments in and outside of the kingdom.

The Shaheen project, spearheaded by Aramco’s Korean subsidiary, S-Oil, “is one of the most complex petrochemical plants with a very high conversion from liquids to chemicals that utilizes Aramco technology,” according to the president.

Al Qahtani — who also serves as a board member of S-Oil, 63.4 percent of which is owned by Aramco — attended the groundbreaking ceremony for the project, at which President Yoon Suk Yeol and Aramco's CEO were also present.

Aramco Downstream President Mohammed Y. Al Qahtani, far left, attended the groundbreaking ceremony for the Shaheen project in Ulsan in March as the company's executive vice president of downstream. President Yoon Suk Yeol, center, and Aramco CEO Amin H. Nasser, third from left, were present as well. [JOINT PRESS CORP]

It marked the biggest foreign investment for a single project ever in Korea.

The plant, which is slated for completion in 2026, will house the world’s largest steam cracking facility with an annual ethylene production capacity of 1.8 million tons, as well as a thermal crude-to-chemicals (TC2C) facility that converts crude to naphtha. It will mark the first ever commercial-scale deployment of Aramco's TC2C technology.

Liquid-to-chemical, or crude-to-chemical is expected to be “a major contributor” to Aramco’s venture toward net-zero emissions by 2050, according to Al Qahtani, as the technology is aimed at “mov[ing] molecules not into internal combustion but rather into more useful products that are more sustainable.”

“Korea has been and will continue to be one of all the biggest markets, important markets in Asia and the world,” said the president.

"[S-Oil] has been a great performing asset, a great platform for growth,” he continued, “That's why we have the full confidence to go with a massive capital investment with our own technology being done for the first time at that scale in S-Oil, and [that is] a testament to the quality of top human assets.”

Aramco has announced substantial investments in downstream operations in other Asian countries as well, particularly in China, through acquisition deals and joint ventures. The goal is to reduce its reliance on upstream revenue while securing profitable outlets for crude production.

The move comes as global oil consumption is forecast to be supported by strong petrochemical demand in coming years, while oil use for transportation is expected to gradually decline.

The downstream president is confident in “continued growth” in oil demand, especially in Asia, as the region expects population growth and improvements to living conditions.

“We see that as also an opportunity for Aramco to participate with huge investments to drive and accelerate a meaningful energy transition that is thoughtful, and at the right pace, that takes needs of nations, affordability and energy security into account.”

Addressing the question of whether growing EV deployment, especially in China, would undermine crude demand in the region, Al Qahtani emphasized that investments in China are focused mainly on high-conversion refineries, as the company is “taking account of the future shift of demand from fuels to chemicals and to EVs as well.”

Hydrogen, which is expected to play a transitional role in Aramco's net-zero initiative, has been another main focus of cooperation with overseas partners, including Korea.

During President Yoon's recent visit to Riyadh, Aramco signed a nonbinding agreement with Korean companies including Korea Electric Power Corporation, Lotte Chemical and Posco Holdings for a $15.5-billion hydrogen production project.

But hydrogen's heavy production and logistics costs remain a major challenge, Al Qahtani said.

"[Hydrogen's price difference with conventional fuels] is a big issue, and it will require technology advancement and also government support toward really making long-term contracts,” said the president, adding that “discussions [happening] right now are to make the whole thing profitable for everyone.”

Al Qahtani has served as Aramco's senior vice president of upstream operations since 2016. He took on the role of executive vice president of downstream in 2020 and was named downstream president in July.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]