Gulf NOC strategies in Asia
Confronted with slowing demand for crude oil, NOCs are increasingly diversifying from the upstream and investing in the downstream sector both in their home markets and in consuming countries to ensure market share. Already more than 75 percent of Gulf NOC oil exports are destined for Asian markets, and more than 70 percent of new demand for oil between 2018-2022 (4.2 mb/d out of 5.9 mb/d) is expected to come from Asia (dominantly from India and China). Likewise, 55 percent of new announced global refining additions and expansions (3.8 mb/d) are centered in the region (IEA, 2017). Accordingly, NOC strategies in Asia aim to lock in market share and capture new demand against the prospects of increased intra-NOC competition and Russian and US exports to Asia.
So far the role of NOCs in Asia has mostly been confined to supplying crude oil, and except Saudi Aramco’s Fujian refinery, NOCs from the Gulf have made limited progress in entering the key Chinese and Indian markets as both countries are dominated by local NOCs. However, in Asian countries with lower entry barriers, the increased focus on downstream market penetration in Asia is already apparent. Examples of this are: Saudi Aramco investments in the RAPID project in Malaysia together with Petronas, the upgrade of the Cilacap refinery in Indonesia together with Pertamina, Kuwait Petroleum Corporation’s (KPC) involvement in Vietnam, ADNOC’s and Saudi Aramco’s storage facilities in Korea and Japan, and ADNOC’s recent MoU to cooperate across the oil value chain with Japan’s JOGMEC.
This study examines strategies of Gulf NOCs in Asia to ensure market share, NOC refining and chemicals investments, the use of oil storage facilities in Asia, and recent efforts to deepen cooperation in India and China. The study also compares and benchmarks different business models from conventional NOCs like National Iranian Oil Company and state-firms in Iraq to the increasingly integrated and internationalized ADNOC, KPC, and Saudi Aramco.