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Saudi Aramco’s downstream business, a key area of investment for the world’s largest oil exporter, saw its earnings more than double as it benefited from a global shortage of refining capacity.

The unit, which produces transport fuels like gasoline and diesel, reported $10.2 billion in first-quarter earnings before interest and taxes, up from $4.4 billion a year earlier, it said in financial statements released Monday.

While still dwarfed by Aramco’s upstream operations, which reported $70 billion in earnings before taxes, it’s a significant turnaround for the fuels unit, which was loss-making throughout 2020. The gain helped Aramco report an 82% increase in profit for the quarter.

With economies recovering from coronavirus shutdowns, travel is up and so are refinery margins. The profit from turning crude into fuels has roughly tripled so far this year. Saudi Arabia’s Energy Minister, Prince Abdulaziz Bin Salman, has blamed high fuel costs on a lack of refining capacity rather than a shortage of crude.

That’s likely to continue. Sanctions and financial restrictions on Russia in the wake of its invasion of Ukraine are choking off supplies into Europe from the east, and the effect is being felt most acutely in oil product exports. China is also shipping less fuel abroad as it focuses on domestic supply.

Aramco is making big bets on expanding in refining and production of goods like paint and plastics. It spent $69 billion buying a 70% stake in chemicals maker Saudi Basic Industries Corp. in 2020, to accelerate a move downstream.

The Middle East is one of few regions adding refining capacity. Aramco is ramping up capacity at its 400,000 barrel-a-day Jazan facility, which will allow it to ship diesel into Europe from the Red Sea plant. Kuwait and Bahrain will also add about 1 million barrels of daily refining capacity over the next year between the two of them. 

Aramco will also build some 4 million barrels a day of capacity to process crude into chemicals, Prince Abdulaziz said during remarks at a conference in Bahrain.

Energy consultancy FGE sees a “golden age of refining” coming after 2024 since no major new plants are set to come online. As economies grow and transport demand rises, Aramco and its shareholders will be counting on continued gains from the downstream business.

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