Saudi Arabia’s expanding foothold in Texas

The New York Times reports: It is hard to imagine the desert sands of the Persian Gulf being any farther away than from this swampy refinery port known for Cajun food, sport fishing and being the birthplace of Janis Joplin.

But right in the middle of town stands a strategic outpost for Saudi Arabia’s global ambitions, although one that the Saudis appear loath to publicize.

The giant Motiva oil refinery, which just completed a $10 billion expansion that makes it the largest processor of gasoline, diesel and other petroleum products in the United States, is owned by Saudi Aramco and Royal Dutch Shell in a 50-50 partnership.

Saudi Aramco’s investment in the refinery expansion is meant to ensure that Saudi Arabia will retain an important market for its crude in the United States at a time when American politicians are declaring their intention to wean the country off imported oil. Adding to the urgency for the Saudis is the fact that the United States is vastly increasing its production and replacing OPEC crude with that from oil sands in Canada.

The expansion of the Port Arthur refinery comes during a particularly complicated period in United States-Saudi relations, as the two countries try to manage changes sweeping the Arab world. While Riyadh has cracked down on dissent and generally resisted efforts to spread democracy in the region, the Obama administration has been less resistant to the changes.

But the Saudis have helped the United States and the global economy by increasing exports to moderate oil prices and top up worldwide supplies as the West applies sanctions against Iran. Saudi Arabia has been able to tap into its spare capacity, mostly lower-quality heavy sour crudes, to stretch its exports. Most refineries cannot easily process those crude oils, but the expanded Motiva refinery here can, freeing other Saudi grades for other markets.

“The Saudis are securing a home for their heavy crude,” said Fadel Gheit, a senior oil analyst at Oppenheimer & Company. “But there is no question that security is also part of the equation. In Saudi Arabia, oil and politics always mix.” [Continue reading…]

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