USA’s third largest oil company ConocoPhillips has pulled out of a new plant with Saudi Aramco in the Middle East. The chief reason behind the withdrawal is its strategy to reduce its refinery operations on demand erosion by the global economic slowdown. The two partners had plans to build a 400,000 bpd refinery in Yanbu Industrial City, Saudi Arabia. Yanbu accounts for just under a quarter of Saudi plans to add around 1.7 mln bpd refining capacity, as per Reuters. Conoco, like other major oil refiners, has seen profits shrink at its plants producing gasoline and diesel fuel from crude oil.
The US oil major decided that the project was not consistent with its current strategy to reduce downstream footprint. Conoco sold its stake in a Canadian oil sands project to Sinopec for US$4.65 bln as part of its program to sell US$10 bln in assets to help reduce its heavy debt burden. Since Conoco is looking to make upstream 85% of its business, they will benefit from the cancelled project.
Aramco plans to go ahead with the plant despite Conoco's withdrawal.