emergence of a global player - aramco trading · 02 aramco trading annual report 2016 03 first of...

Aramco Trading Emergence of a Global Player

table of contents

page03Comapny Overview

page06Timeline of Key Events

page09Product Portfolios

page15Market and Customer Base

page17Storage and Blending

page19Polymer Hubs

page2 1Chartering

page2 3Market Presence

Aramco Trading

page25Compliance and Risk Management

page27Safety

page29Human Resources

page30Facts and Figures

03 Aramco Trading Annual Report 201602

First of all, I want to thank every member of the Aramco Trading family for their efforts and contributions to the company’s successes over the past five years. Aramco Trading’s only asset is its people. Without this group of dedicated employees, the achievements of these past years, as well as our major plans for the future would not be possible.

We started our journey to add value to Saudi Aramco’s downstream portfolio in 2012, with a mission to “balance Saudi Aramco’s downstream system reliably and efficiently while maximizing trading margins through best-in-class practices.” We have grown steadily since then and now, having a major presence in the petroleum markets, as well as a developing petrochemical presence. Looking back, Aramco Trading faced a challenging marketplace with lower prices, increasing competition, new trade patterns, and fluctuating supply and demand balances because of domestic pricing changes, geopolitical issues, and production issues. Despite this, Aramco Trading achieved a record trading volume of 1.5 million barrel per day of liquid products, while polymer sales grew to 400 kilotons per annum (KTA). Aramco Trading steadily increased volume from the company system and third parties, coupled with increased blending capabilities, to maintain our ever-increasing market coverage and include new markets in Africa, New Zealand, Australia, and Brazil. Throughout this growth, we have remained loyal to our mission and have been able to build on the company’s strong foundation and shareholder support to expand the scope and scale of the operations. Aramco Trading’s

structured risk management and hedging has shielded the company from extreme market conditions, despite the turbulent and extremely volatile market in recent years. With the turbulent and, risk management and control will be an ever-increasing focus going forward as the company expands into increasingly complex and competitive markets and products. The challenges faced by Aramco Trading this coming year, as well as in the future, require us to continue to change and adapt in order to ensure the continuance of delivering maximum value to our shareholder. To this end, the company will continue moving forward by exploring new markets, developing new counterparties, and expanding the product base, while keeping strong focus on risk management and safety while maintaining a strong focus.

Aramco Trading will also continue on its “One Company, One Culture” path to foster a more cohesive workforce that pulls in the same direction. In addition, this year we will fully develop a Singapore office (SATS) that will leverage its location in the hub of the Asian hydrocarbon market, as well as the local labor pool, to better establish Aramco Trading’s presence in Asia. This will provide the solid foundation that the company requires to build on for meeting its vision of becoming a “Trading Powerhouse.” We should all be proud of our accomplishments over the past five years. I am confident that the progress we have made to date, combined with our planned initiatives, will lead us to further success.

Aramco Trading achieved a record trading volume of 1.5 million barrel per day of liquid products, while polymer sales grew to 400 kilotons per annum (KTA).

Message from the CEO

Ibrahim Al-BuainainCEO


Abdullah Alsadaan Chairman of the Board

Abdullah Mansour Board Member

Ibrahim Al Buainain CEO & Board Member

Ahmed Subaey Board Member

Sheila Alrowaily Board Member

board of directors


company overview

Board of Directors


The Saudi Aramco Products Trading Company (“Aramco Trading”) was established in October 2010 under the approval of Saudi Aramco’s Board of Directors. The wholly-owned subsidiary started operations in January 2012, focusing on the trade of refined products, blending components, bulk petrochemicals, and polyolefins. To ensure the success of such operations, Aramco Trading focuses on two corporate objectives: managing the Kingdom’s growing demand for refined products, and handling the additional production streams from Saudi Aramco’s current and future downstream investments. Aramco Trading is actively reducing its reliance on external traders while increasing Saudi Aramco’s ability to optimize the Kingdom of Saudi Arabia’s domestic requirements. At the same time, the company continue its effort to capture opportunities in the market.

Aramco Trading moved into its corporate offices in Al-Midra Tower in Dhahran, Saudi Arabia and launched its operations in January 2012. By mid-year, the company had staffed its various functions, the Front, Middle, and Back offices with experienced professionals that were recruited both locally and

internationally. During the second quarter of 2012, derivative trading with seven international banks was assumed, as well as chartering functions from Saudi Aramco’s subsidiary, Vela.

Throughout its short history, Aramco Trading has been able to grown exponentially, introducing leased storage and blending facilities in 2013 in order to optimize operations. Hedging was also introduced during the same year as a means of risk mitigation. In 2014, trading activities expanded the Company’s portfolio to include liquid chemicals and polymers. In 2015 and 2016, third party trading was introduced as a means of value creation and to enhance the optimization of operations.

Since its launch, Aramco Trading has emerged as the Middle East’s premier oil-based energy trading company, as well as the largest shipper of refined petroleum products in the region. Today, we are recognized as a key trading partner by refiners, shipping companies, financial institutes, end-users, and other products trading companies and houses.

company overview

Our values Our mother company’s (Saudi Aramco) corporate values guide our business operations and are factored into all dimensions of who we are and how we operate. We are proud of our corporate values as set forth below, which represent the backbone of how we trade, deliver, and meet our customers’ needs.

Excellence We drive for best results and are agile when addressing new challenges. We set challenging goals, and foster creativity and innovation in meeting our customers’ needs. We believe that excellence is not a destination, but a journey that we are committed to. Safety The safety and well-being of our workforce is our first priority. We operate safely and reward outstanding safety achievements. Safety is a lifestyle that we are committed to at work, on the road, and at home.

Accountability We take responsibility for meeting corporate objectives and our customer’s needs. We are accountable to ourselves and to customers, and we are committed to continuous improvements.

Integrity We follow ethical standards in conducting our business. We act with integrity and abide by all applicable laws, regulations, and standards in our conduct.

Citizenship We are a positive influence in our communities. We demonstrate social responsibility at work and at home, and we act as a role model for others.


our missionTo integrate Saudi Aramco’s global downstream assets to maximize profitability, while ensuring that Saudi Aramco’s system is optimized and reliably balanced.

our vision

To be a key global trader of refined products and bulk petrochemicals through the integration of Saudi Aramco’s downstream assets.


October 2010

Establishment of Aramco Trading after approval of Saudi Aramco’s Board of Directors

January 2011

Incorporation of Aramco Trading

January 2012

Commencement of Aramco Trading's Operations

Start of Chartering Functions

2013

Introduction of lease blending, storage facilities, and hedging.

2014

Introduction of liquid chemicals and polymers to the trading portfolio

2015/2016

Launch of 3rd party trading

Timeline of key events (201٠-present)


Gasoline Aramco Trading is the biggest gasoline player in the Arabian Gulf market. We have expanded regionally and internationally to cover the GCC countries, Africa, the Indian subcontinent, Southeast Asia, New Zealand, Australia, and Brazil. Aramco Trading has two strategic locations for gasoline storage and blending: in Fujairah and Yanbu. This process produces 91 and 95 octane gasoline for vehicles by sourcing components and refined products, testing the component mixes in a laboratory, and then loading the appropriate components into Aramco Trading’s vessels for the desired blend. The vessels are equiped with mixers that guarantee the right gasoline blend on delivery. Naphtha Aramco Trading is the largest global naphtha trader in the East of Suez market. Naphtha is the main feedstock for the petrochemical industry to manufacture petroleum components, such as olefins and aromatics, and can also be used for gasoline production.

Saudi Aramco can export as much as 10 million metric tons per year, making the Company the leading naphtha producer. As for customers, Asian nations, more specifically Japan and South Korea, require the highest demand for naphtha.

Middle Distillates (Diesel & Jet) Aramco Trading is one of biggest global players in the middle distillates market, with more than half a million barrels of middle distillate product traded per day. Our extensive supply networks cover the GCC States, Africa, Europe, and Asia. Fuel Oil We offer our customers a range of fuel oil products, and we follow the global fuel oil market closely, with three trading hubs in the United States, Europe, and Asia. These hubs identify trading opportunities and determine blending strategies. Aramco Trading also has a fuel oil blending facility in Fujairah to deliver products that meet our customers’ requirements.

product portfolio Refined Products


Sulfur Aramco Trading is the biggest exporter of sulfur in the Arabian Gulf and Red Sea, exporting around 33.5 million tons per year.

Sulfur is removed from most petroleum products, as mandated by global environmental regulations. As a result, many refinery and gas processing facilities produce associated sulfur.

Sulfur is an important raw material that is used in fertilizers and insecticides. Sulfuric acid is also used in gunpowder, matchsticks, and in other industrial materials, such as asphalt and cement.

PetCoke Aramco Trading began exporting petcoke in 2015, and has since emerged as the biggest exporter of high-sulfur petcoke in the region. We export over 3 million tons a year of

petcoke from Saudi Aramco’s joint venture refineries.

Petcoke is a refining byproduct, with a variety of types produced around the world. Petcoke is used in the production of cement, aluminum, and steel, as well as in power generation.

Condensate / Khuff Condensate is equivalent to light, sweet crude. Condensate is distilled to naphtha in a splitting plant, and can be further distilled for other refined products. This makes it attractive for refiners and plants to build splitters as part of their operations.Aramco Trading trades condensate when production exceeds a plant’s splitting capacity. Saudi condensate (Khuff, 55 API, low sulfur) is considered one of the highest-quality condensates available in the region.

product portfolio Special Products


Aramco Trading started trading liquid chemicals in 2014, shortly after Saudi Aramco began producing chemicals. By 2020, Aramco Trading aims to be amongst the top five paraxylene (PX) and benzene producers in the global market.

We trade paraxylene (PX), benzene, and monoethylene glycol (MEG), as well as feedstock. With our efficient supply chain, robust business, and close collaboration with joint ventures and third parties, our business is growing rapidly. Product volumes are increasing, and new products are being introduced, including phenols, acetone, and methyl methacrylate (MMA).

Polymers Polymers play an essential role in our everyday modern life as they are the primary building blocks of a large range of products

that we depend on across several industries: plastic packaging, automotive, medical, kitchenware, home appliances, textile, and many other industries.

Aramco Trading established its global presence in the polymers market in 2014, with the introduction of Linear Low-Density Polyethylene (LLDPE), High Density Polyethylene (HDPE), Homopolymer Polypropylene (PP-HP), and Impact Copolymer Polypropylene (PP-CP). With an annual capacity of over 600 KT, these products are marketed around the globe with special focus on Northeast Asia, Southeast Asia, the Indian subcontinent, Northern Africa, and Southern Europe.

LLDPE Linear Low Density Polyethylene Aramco Trading offers a wide range of Linear Low Density Polyethylene grades featuring balanced toughness and stiffness. They are typically used for a variety of film applications such as general purpose film, stretch film, garment packaging, agricultural film, and more.

HDPE High Density Polyethylene Aramco Trading offers High Density Polyethylene, which is used for film extrusion and blow molding application. These grades combine the ease of processing with stiffness, impact properties and good environmental stress cracking resistance.

HPP Polypropylene Homopolymers Aramco Trading offers a wide range of homopolymers grades. They are typically used for a variety of applications such as BOPP film and yarn extrusion, thermoforming, and injection molding.

CoPP Polypropylene Copolymers Aramco Trading offers a wide range of Impact Copolymer Polypropylene of low and high MFI. These grades exhibit good processability and impact strength and stiffness properties. The offered grades are suitable for different injection molding applications such as automotive battery casings, appliances, outdoor furniture, and industrial application.

product portfolio Liquid Chemicals


During its five years of operations, Aramco Trading has been able to penetrate markets in almost every continent, with trades expanding from the United States of America to Australia. The company has reached markets in North West Europe, East and South Africa, the Indian subcontinent, North East and South East Asia, as well as several countries in the Middle East.

The Polymer business has also maintained a strong presence in all major polyolefins markets, with a strong participation in China, Southeast Asia, the Indian subcontinent, Turkey, and Africa.

market and customer base

Market reach

ATC’s Market Presence


Aramco Trading has gradually started to lease blending facilities over the past couple of years as part of its portfolio expansion. The storage and blending process started back in 2013, and as of 2016, there are two leased locations – in Fujairah and Yanbu. The Fujairah location blends both gasoline and fuel oil, while the Yanbu location focuses on gasoline only.

Blending facilities are used to meet Saudi Aramco’s system requirements in various locations throughout the Kingdom, and is also used to supply market requirements for different regions and their respective specifications. Aramco Trading blends off

spec products to meet standard or required specifications, which produce products with an increased value.

Essentially, blending is used to serve the customer’s requirements by customizing blends to meet different consumer and market requirements. Doing so helps capture blending value, which then increases profitability.

storage and blendingFujairah

Yanbu

Seychelles

Mayotte

Maldives

IndonesiaSingapore

China

Malta

KuwaitEgypt

Yemen

Iraq

India

Pakistan

Jordan

Sudan

Kenya

Tanzania

Mozambique

Zimbabwe Madagascar

UAE

Storage and blending


This type of marine operations involves the transfer of cargos between two ships that are positioned alongside one another. Ship-to-ship operations are only done at the designated anchorage areas, which is approved by respective port’s authority. This type of operation is always done in the open sea. Ship-to-ship operations are used to optimize transfers and overcome limitations in supplying cargos to Aramco Trading’s customers. This type of cargo transfer is used for several reasons, including the following:

• Breaking Bulk:• Berth Limitation: which occurs when a berth cannot accept certain ship sizes. In this case, bulk is broken up into smaller ships – which are acceptable at receiving berths• Freight Optimization: To save on freight cost, a cargo is loaded onto multiple smaller ships for delivery to various

locations. By doing so, the primary ship saves on transportation cost by avoiding a long journey.• Receiver’s Tank Limitation: when a receiver’s tank has a quantity limitation, the breaking bulk method is used in order to reduce a cargo’s quantity to fulfill the customer’s required quantity

• Quality Correction: this is when a cargo is unloaded into smaller vessels for blending. This method is used in order to correct and/or enhance products to meet customers’ specific requirements.

• Reducing Berth Congestion: to avoid over congesting berths with multiple vessels at the same time, this technique allows for the use of larger ships rather than multiple smaller ones.

ship to ship (STS):


Algeria

Argentina

Bangladesh

Belgium

Brazil

China

Croatia

Ecuador

Egypt

France

Germany

Ghana

Greece

Hong KongIndia

Indonesia

Italy

Ivory Coast

Japan

Kenya

Lebanon

Liberia

Liguria

Malaysia

Mexico

Morocco

Myanmar

Nepal

Netherlands

Nigeria

Pakistan

Peru

Philippines

Poland

Portugal

Romania

Singapore

Slovenia

South Africa

South Korea

Spain

Sri Lanka

Sweden

Taiwan

Tanzania

Tenerife

Thailand

Togo

TunisiaTurkey

Ukraine

United Kingdom

United States

Uruguay

United Arab Emirates

Vietnam

United States

As part of its expansion process, Aramco Trading started utilizing polymer hubs in order to enhance its distribution model. These hubs are used as stock points by placing en-route containers in storage, which are made available by shipping lines at a minimum cost. Hubs represent a vital component of the polymers business, acting as the backbone of its logistics through reliable and on-time supply to key markets.

The hubbing strategy provides potential cost savings for customers faced with shortages at their destinations. It also enables Aramco Trading to take a position in the market and to capture value creation for the business.

During 2016, Aramco Trading operated four hubs, with two locations in Saudi Arabia (1 in Jeddah Islamic Port and 1 in King Abdullah port) and two in the UAE (1 in each of Khor Fakkan and Jebel Ali). In the future, Aramco Trading plans on expanding the hubbing locations to Asia and Europe to cater those markets.

polymerhubs

Polymer hubs


charteringAramco Trading delivers refined, liquid chemicals, and polymer products to customers around the globe. This means we blend the products, manage their movement, and provide our customers with real-time logistical support; this is done 24 hours a day.

Aramco Trading is the region’s biggest spot-chartering company, with a chartered fleet of more than 40 tankers that average around 120 voyages per month. This is done along with one very large crude carrier (VLCC), which is used as a floating storage. Our team

takes care of everything, from identifying the ideal shipping solution to tracking each shipment around the clock. We are entrusted with handling Saudi Aramco’s domestic and international supplies to worldwide markets, including crude, refined products, pelletized sulfur, petroleum coke (petcoke), and petrochemicals.

We offer our cost-effective services to each of our customers and partners worldwide. From inception to completion, we are with you every step of the way.

GP (General Purpose) 10,000 to 25,000

MR (Medium Range) 25,000 to 45,000

PANAMAX/LR1 (Long Range 1) 45,000 to 80,000

AFRAMAX/LR2 (Long Range 2) 80,000 to 160,000

VLCC (Very Large Crude Carrier) 160,000 to 320,000

ULCC (Ultra Large Crude Carrier) 320,000 to 550,000

Vessel class and capacity (thousand capacity metric tons)

Size Domestic Fleet International Fleet

MR 13 7

PANAMAX/LR1 1 3

AFRAMAX/LR2 5 6

VLCC 1 0

Total 20 16


market presenceAramco Trading currently has three offices around the world. Since 2012, the company’s headquarters have been located in Dhahran, Saudi Arabia within the parameters of the Saudi Aramco company.

The Company has been actively expanding its global footprint through opening international offices around the world. In May 2015, the Singapore office was officially registered as an Aramco Trading Office. This office started operations in September of the same year.

The polymers team also have one international office, located in Xiamen, China. This office, which is operated by Saudi Aramco, first opened back in 2007. Aramco Trading started operating at the facility in 2014.

Looking forward, Aramco Trading has plans on expanding its market presence even further through opening additional offices abroad to help continue its growth globally.

Dhahran Headquarters 2012 China Office 2014

Singapore Office 2015

Expansion of global footprint


compliance and risk management

Aramco Trading believes that compliance and risk management are integral parts of our assessment for strategic and operational activities. Therefore, we aim to generate value while maintaining an appropriate risk profile.

ComplianceOur compliance function is responsible for ensuring compliance with all internal and external laws, rules and regulations, and to adhere to the guidelines of Saudi Aramco’s Compliance Office.

This includes addressing a wide range of issues, from anti-corruption to data privacy and cyber security.

Risk Management Risk management is an essential function of trading and operational activities at the Company. Its main responsibility is to design and approve risk limits, among other functions. The Middle Office sets trading risk limits, credit limits, and performs the measurements and reporting of exposures against those limits.


safetyAramco Trading upholds the highest level of safety measures to safeguard the well-being of employees and the organization as a whole. The Company realizes its responsibility in ensuring the protection of its employees, workplace, products, and trades, and is actively engaged to fully ensure this. Such safety measures include:

• Building Safety: Working closely with Saudi Aramco’s Office Services and Loss Prevention Groups to comply with safety standards

• Workplace Safety: Inspections by the Human Energy Management Group (Wellness Group) to ensure the safety of Aramco Trading’s environment

• Employee Safety: Showcasing and sending employees to training courses (i.e., first aid, CPR, etc.)

• Vessel, Client, and Products Safety: Vessel Inspections and Prevention Management, including: Ship Inspection and Reporting Program (SIRE), Tanker Management and Self-Assessment Audit (TMSA), and Business Continuity Drills (Crisis Management Drills)


At Aramco Trading, we believe in the diversity of our people and continue to recruit employees from various backgrounds to help prosper the growth of our organization and its vision. As of late 2016, the total headcount at Aramco Trading was 164, with males representing 82.9% of the workforce (136 employees), and females representing 17.1% (28 employees). Aramco Trading is active in its recruiting efforts, to hire suitable candidates that will support the Company in advancing its goals, as well as help diversify the workplace.

Aramco Trading strongly believes in the value of its employees, and has a diverse workforce with people from various countries. This variety helps reinforce the success of the organization by adding value through experience, education, and more. In addition to Saudi employees, there are 15 other nationalities represented in the office, from countries such as Japan, Mexico, the United States and more. The total expat community at Aramco Trading represents 19% of the workforce, with the remaining 81% made up of Saudi employees.

human resources

workplacediversity

18.8%81.2%

Expat Saudi

employeediversity

17.1%82.9%

Male Female

workplacediversity

18.8%81.2%

Expat Saudi

employeediversity

17.1%82.9%

Male Female


Polymers 2012 2013 2014 2015 2016

HDPE - - 35 93 78

CoPP - - 32 91 78

LLDPE - - 40 154 106

HPP - - 34 119 150

Total - - 141 457 412

Product Group ($BN) 2012 2013 2014 2015 2016

Refined Products 28.31 32.86 36.66 24.84 22.91

Special Products 0.53 1.01 1.42 1.01 0.61

Liquid Chemicals - - 0.47 0.69 0.66

Polymers - - 0.22 0.53 0.45

Chartering 0.14 0.23 0.20 0.28 0.27

Total 28.97 34.10 38.97 27.35 24.88

Traded Volumes

Revenue

facts and figures (2012-2016)

Refined Products (MMB) 2012 2013 2014 2015 2016

Gasoline 35.03 51.95 73.42 55.59 49.17

Naphtha 61.11 60.45 747.97 108.93 115.17

Diesel 69.42 98.77 110.82 126.87 155.47

Jet 15.76 13.00 24.57 20.96 25.43

Fuel Oil 53.48 61.32 60.44 59.22 71.34

VGO 1.93 1.43 0.43 1.49 2.30

LCO - 2.04 2.29 0.04 -

Blending - - - 39.58 56.75

Total 236.75 288.96 1,019.94 412.67 475.62

Special Products (MMB) 2012 2013 2014 2015 2016

Khuff 8.66 5.71 1.78 1.34 1.32

Sulfur 17.04 17.13 22.04 23.02 23.92

Asphalt 0.12 0.92 3.78 4.69 0.86

PetCoke - - 0.48 12.45 18.65

Butane - 13.21 3.14 - -

Total 25.82 36.97 31.21 41.49 44.75

Liquid Chemicals (MMB) 2012 2013 2014 2015 2016

Benzene - - - 0.89 1.34

Paraxylene - - - 2.75 3.04

MEG - - - 1.68 1.55

Toluene - - - - 0.01

n-Hexane - - - 0.03 0.05

Butene - 1 - - - 0.13 0.14

Propylene - - - - 0.12

Total Total - - - 5.48 6.25

emergence of a global player - aramco trading · 02 aramco trading annual report 2016 03 first of...

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