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Saudi kings Asia tour trumpets Aramcos moves downstream

´╗┐Saudi King Salman's lavish tour of Asia, arriving in each country on a golden escalator with 400 tonnes of luggage, had a hardnosed marketing mission - to cement the kingdom's place as leading oil supplier to the world's biggest consumer region. The string of deals inked on his three-week tour to Malaysia, Indonesia, Japan and China also point to a fresh strategy, one to increase Saudi leverage over refined product and petrochemical markets, known as the downstream sector."Our strategy is about growth in the downstream," said Amin Nasser, chief executive officer of state oil company Aramco, told Reuters on Sunday. "The growth in that sector is very important, and anything integrated between refining, petrochemical, with marketing and distribution, is of interest to us." Saudi Arabia's main influence on oil markets has been via the Organization of the Petroleum Exporting Countries (OPEC), of which it is the de-facto leader. But OPEC's ability to control prices by turning the oil pumping spigots on and off has waned as non-OPEC producers like Russia and, more recently, U.S. shale drillers, have ramped up output and eroded its grip on market share. One indication of a shift in Saudi strategy came on the first leg of the tour in Kuala Lumpur. Aramco signed a deal to take a $7 billion investment, in a joint venture with Malaysia's state oil company Petronas in a refinery and petrochemical project known as RAPID (Refinery and Petrochemical Integrated Development).'THE WINDOW' Under construction in Malaysia's southern Johor state, RAPID is just across a narrow strait from Singapore, Asia's oil trading hub. Some 70 percent of the oil for the project, set to start in 2019, will come from Saudi Arabia, giving the kingdom a key outlet for its crude in Asia, the world's fastest growing market. It is Armaco's largest refinery project outside the kingdom.

Aramco also recently made a deal with Indonesia's Pertamina over a $5 billion expansion of the country's largest oil refinery, for which Armaco will supply the crude."The investments are intended to enhance Aramco's competitive position in Southeast Asia," said Ihsan Buhulaiga, a Saudi economist. The Malaysian investment also allows the Saudis to join the hub of refineries in and around Singapore that help determine fuel prices in the region. Price agency S&P Global Platts (SPGI. N) assesses dozens of fuel products during a set time every day, based on deliveries in and out of this region. Platts calls it Market-on-Close, but traders dub it "the window", and it influences pricing of oil products worth billions of dollars each day.

While crude and fuel products by many companies flow in and out of the pricing region, known as FOB Straits. But the only refineries now in this price region are operated by U.S. Exxon (XOM. N), Anglo-Dutch Royal Dutch Shell (RDSa. L), and Singapore Petroleum Corp (SPC), owned by PetroChina (601857. SS)."When you control refining capacity with the capability to deliver petroleum products into the window, you have access to a physical outlet which also plays a key role in daily price discovery," said John Driscoll, director of consultancy JTD Energy in Singapore. ARAMCO IPO The Saudi move deeper into refineries and petrochemical plants would likely help the potential valuation of Aramco in what could be the world's largest-ever initial public offering.

Deputy Crown Prince Mohammed bin Salman, who oversees the kingdom's economic policy, has said the sale is expected to value Aramco at $2 trillion or more. Analysts have estimated a valuation between $1 trillion and $1.5 trillion. Singapore, along with Hong Kong and Tokyo have been mentioned as possible exchanges where Aramco's shares would be traded. The primary listing will be on Saudi Arabia's domestic exchange, and Riyadh is also looking at New York or London for the secondary listing. Aramco's joint ventures in Malaysia, Indonesia and elsewhere are not only aimed at increasing its refining capacity. Its new deals in the region would also greatly increase its participation in the petrochemical sector, which involves all forms of plastics and where profits have soared thanks to strong demand. "We have capacity of about 5.4 million barrels per day of participated refining capacity, and our target is to reach 10 million barrels by 2030," Aramco's Nasser said. Ultimately, the big prize is China, where the Saudis signed deals that could be worth as much as $65 billion during the last leg of the king's Asian tour, covering energy, manufacturing and even a theme park in the kingdom. The deals included a memorandum of understanding between Aramco and China North Industries Group Corp

Trump tax plan faces rockier road after stinging healthcare loss

´╗┐Following the failure of a healthcare bill backed by President Donald Trump, his administration plans to take a lead role in crafting major legislation to cut taxes with an eye toward meeting an August target date, the White House said on Monday. Trump's pledge to cut taxes, including a lowering of the rates paid by corporations, was a pillar of his 2016 presidential campaign and provided much of the fuel for the heady stock market rally that followed his Nov. 8 victory."Obviously, we're driving the train on this," White House spokesman Sean Spicer told a briefing."We're going to work with Congress on this," Spicer said, adding that tax cut legislation is a "huge priority" for the Republican president and "something that he feels very passionately about."Spicer noted that U.S. Treasury Secretary Steven Mnuchin has talked about August as a target date for tax legislation, but added that the timetable could slip depending on how quickly a consensus could be reached. Getting a broad tax bill passed by Congress and on Trump's desk for signature into law looks to be no easy feat, especially after intra-party differences last week torpedoed the healthcare legislation he had backed. Republicans for seven years had promised to dismantle Democratic former President Barack Obama's Affordable Care Act, dubbed Obamacare, and the Trump administration had made it its top priority when he took office in January. But the effort collapsed on Friday when members of the Freedom Caucus, including the most conservative lawmakers of the House of Representatives, refused to support the bill, which was also backed by House Speaker Paul Ryan. The stinging defeat alarmed investors who began reassessing the chances for passage of the tax agenda this year. Major U.S. stock indexes opened sharply lower on Monday before paring the lion's share of the losses.

The healthcare failure in Trump's first major legislative initiative showed that keeping Republicans united is a tricky business.'TRUMP IS STUCK' "Trump is stuck, he can't cajole the arch conservatives in the Republican Party and at the same time, my sense is the Democrats don't want to throw him a bone either, so it is going to be difficult," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago."It's going to be very, very difficult," Republican lawmaker Ted Poe of Texas told CNN's "New Day" program. Poe, who resigned from the Freedom Caucus after the healthcare debacle, said Trump's hope of getting a major infrastructure spending through Congress was no "slam dunk" because of likely opposition from conservatives. Infrastructure spending is another leg of the "pro-growth" Trump strategy.

"It is so easy to sit back, cross your arms, say 'No, not going to support that.' And then what do we have?" Poe said. "... We have to lead. We're the party in power."Analysts at Bank of America Merrill Lynch said in a research note that a tax bill, "if passed at all, could be a very watered-down version of current proposals."The White House over the weekend dangled the idea of a compromise tax restructuring that could win support from moderate Democrats. White House chief of staff Reince Priebus on Sunday said such a package could include middle-class tax cuts. Spicer on Monday remained vague on how much Trump would allow the federal deficit to grow as a result of the tax cuts.

"It's a really early question to be asking at this point," Spicer said. The U.S. tax code has not undergone a major overhaul since 1986, during Republican former President Ronald Reagan's administration. Democratic Senator Christopher Coons signaled his party would be open to discussing tax legislation if it was not merely a giveaway to the rich. Democrats fought former President George W. Bush's tax policies for that reason. "If we have a move toward tax reform that could strengthen manufacturing, strengthen our exports and provide tax relief to the middle-class - not overwhelmingly to the wealthiest - there's a menu for us to start talking about it," the Delaware senator told MSNBC's "Morning Joe" program. Although winning over Democrats may be tough, the alternative - getting Republicans to vote as a bloc - it could be a hard road in light of the healthcare rebellion by Republican lawmakers. Despite aggressive lobbying by Trump, Ryan and Vice President Mike Pence, Freedom Caucus members saw too may similarities to Obamacare. Moderates were concerned over the prospect of millions of Americans losing health insurance. One Republican lawmaker, Representative Tom Cole of Oklahoma, suggested Congress focus first on such things as getting a "realistic budget" done and passing legislation to raise the national debt ceiling."And then start on tax reform," Cole told MSNBC's "Morning Joe" program, adding, "But start with real hearings and start in a way that everybody at least at the outset is a potential player."