Saudi Arabia aims to create the world’s largest fleet of oil tankers following the establishment of a new US$1.5 billion investment fund by Arab Petroleum Investment Corporation, (Apicorp), and National Shipping Corporation of Saudi Arabia (Bahri).
Under the Apicorp Bahri Oil Shipping Fund venture announced yesterday, fifteen very large crude carriers (VLCCs) would be added to the shipper’s expected fleet of nearly fifty such vessels over the next two years. Bahri currently owns 36 VLCCs and plans to add ten more by 2018.
“The additional 15 VLCCs will be on top of the current and future fleet of Bahri that is over 45, and this will make Bahri the world’s largest oil shipping company,” said Saudi Energy Minister Khalid Al-Falih according to Bloomberg.
The minister also claimed the deal would strengthen Saudi efforts to ensure a secure oil supply to meet rising global demand.
Saudi Arabia is the world’s biggest oil exporter and ships some 20 percent of its oil cargoes by sea via state-run firm Saudi Aramco. According to recently released the Organization of Petroleum Exporting Countries data, Saudi oil production rose to a record of nearly 10.6 million barrels per day last June after maintain steady output since August 2015.
A joint statement claimed that the project would be financed with a mix of debt and equity.
Apicorp will control 85 percent of the new fund, whereas Bahri will run the remaining 15 percent and also act as the commercial and technical manager for the tanker fleet.
Raed al-Rayes, Apicorp’s deputy chief executive officer and general manager, expects the fund to generate returns of more than 10 percent. He suggested Apicorp could invite other institutional investors like regional pension funds to invest in its project with Bahri.
China Merchants Group is believed to be the biggest owner of VLCCs and ultra large crude carriers with a total of 53 vessels including those on order.
By Erwin Cifuentes for Oilprice.com
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Furthermore, your comment with respect to Saudis oil production and pricing reflects an equally simplistic, short sighted analysis. A miss-comprehension of the Saudis Geo-economic position. The Saudis pricing model is reflective of two main goals: first, maintaining global market share and second, the limitation or decimation of any and all possible competition-present or future.
Yes, the Saudis could cut production, yes, they could raise the price of their crude. However, doing such at a time when the global crude market is “a wash” in oil would be neither prudent nor wise. In a world a wash in crude, a price increase on the Saudis’ part would open the door for another major producer to sell at a lower cost. Net result, Saudi Arabia would suffer both decreases in both revenue and global market share. From their standpoint, such would be the ultimate “loss-loss”.
The Saudis’ second goal is to the decimation of world oil production from fracking. The Saudis global pricing model is “aimed” at keeping the price of oil lower than the marginal cost or operational cost required to produce oil from fracking. By keeping the price of oil lower than the marginal cost of fracking production, the Saudis are insuring that competition from fracking production from any country, ie, US, Argentina, Brazil, Venezuela, Mexico, China, etc, would be postponed as long as possible and, if produced, least profitable situation.
The fact is the Saudis, along with OPEC, are not, have not, never were our “friends”. Their main goal is to enhance, protect and guarantee, their dominance in the oil market for as long as as profitably possible. Anyone expecting them, referring to OPEC, to do the US or any other country a favor by jeopardizing their respective position in the global oil market is having a “wet dream”.