Saudi Arabia: The World’s Largest Petroleum Producer and Net Exporter in 2012

The Kingdom of Saudi Arabia (KSA) has a population of about 26.0 million. The government type is a monarchy run by King and Prime Minister Abdallah bin Abd al-Aziz Al Saud according to the CIA’s World Factbook. He belongs to the Al Saud family which controlled the country since it was created. In fact, the country is named after the family. As a result hundreds of members of this family and relatives hold almost all of the key positions in the government.

Saudi Arabia has almost one-fifth of the world’s largest proven oil reserves and is the largest producer and exporter of total petroleum liquids in the world. Hence the economy is largely oil-based and the state controls major economic activities. In 2012, the estimated GDP based on purchasing power parity was about $740.0 billion. Saudi Arabia’s trade partners are most of the major developed countries and emerging countries due to their dependence on Saudi oil. The country is also leading member of the OPEC.

Saudi Arabia follows a process called “Petro-Dollar Recycling”. Under this long-standing arrangement between the Kingdom and Western powers, the Kingdom receives US dollars in exchange for selling the oil in the global market. Then after spending some of the funds for running the government and maintenance of the monarchy, the remaining funds are channeled back by Saudi Arabia into Western countries via banks and other avenues. High oil prices in the past few years mean billions of extra dollars pour into Saudi coffers almost on a consistent basis.

Saudi Arabia was the world’s largest producer of petroleum products and net exporter in 2012 according to a report by the Energy Information Administration (EIA).

Click to enlarge


Saudi-total-production-2012

Source: EIA

From the report:

Saudi Arabia was the world’s largest producer and exporter of petroleum and other liquids in 2012, producing an average of 11.6 million barrels per day (bbl/d) and exporting an estimated 8.6 million bbl/d (net). Saudi Arabia produces more than three times as much of these liquids as the next largest member of the Organization of the Petroleum Exporting Countries (Iran), and as much as the rest of the Arab Middle East put together.

In addition to leading the world in production and exports, Saudi Arabia has an estimated 268 billion barrels of proved oil reserves—over 16% of the global total—and is the only country in the world with extensive spare oil production capacity, which can help cushion market disruptions. While Saudi Arabia has about a hundred major oil and natural gas fields, more than half of its proved reserves are contained in eight fields. Saudi Arabia’s (and the world’s) largest oil field (Ghawar) alone contains an estimated 70 billion barrels of proved reserves, more than the proved reserves in all but seven other countries.

In 2012, 16% of Saudi liquids exports were sent to the United States, accounting for 13% of total U.S. liquids imports. While Canada is the prime supplier of U.S. liquids imports, Saudi Arabia remains an important supplier.

Saudi Aramco, the main oil company of the Kingdom is a National Oil Company (NOC) and is fully owned by the state.Hence it is not possible to invest in the company. For the first 10 months of 2012, Saudi Arabia ranked second in petroleum exports to U.S. after Canada.

The following chart shows the export destinations for Saudi crude oil:

Click to enlarge

Saudi-crude_oil_exports-Destinations-2012

How to invest in Saudi Arabian stocks?

Unfortunately none of the Saudi companies are currently listed on the US markets as ADRs or otherwise. Van Eck has filed to launch two country-specific ETFs this year for Saudi Arabia.

For investors that have access to the Saudi Stock Exchange (or Tadawul) one way to invest in the top firms is via The HSBC Amanah Saudi 20 ETF that was launched in 2011.

From an article in the UK-based ETF Strategy site:

The HSBC Amanah Saudi 20 ETF aims to offer investors capital growth over the medium to long-term by replicating the performance of the HSBC Amanah Saudi 20 Equity Index.

The index, created by Standard & Poor’s, is made up of the top 20 Shariah-compliant Saudi companies listed on Tadawul.

The fund, which comes with a Total Expense Ratio (TER) of 0.75%, will use physical replication in tracking its index – thereby physically owning the underlying securities of the index it is tracking.

The fund is up 4.3% YTD according to a factsheet by FE Trustnet Offshore.

Disclosure: No Positions

The Largest Australian Companies by Revenues 2012

The nine Australian companies that appear in the Fortune Global 500 list are shown below:

Source: Fortune Global 500, Fortune

Four of the largest banks in Australian are in the list.

Related ETFs:

iShares MSCI Australia Index (EWA)

Disclosure: No Positions

Mexico is Becoming More Attractive to U.S. Manufacturing Firms

Mexico’s economy boomed when the country signed the North American Free Trade Agreement (NAFTA) nearly two decades ago. The manufacturing sector especially thrived as U.S. firms shifted their operations to Mexico to take advantage of the cheap labor costs. As a result Mexico’s share of U.S. manufactured goods import rose from slightly about 4% in 1994 to about 13% in 2001 according to a report in the latest issue of IMF’s Finance & Development magazine.

Then the party almost came to a halt when communist China joined the World Trade Organization (WTO) in 2001. China’s entry into the WTO gave the country a strong edge over over Mexico since China could freely export its goods to the U.S. without any import restrictions.  Hence China’s goods exports to the U.S. rose significantly while Mexico’s exports  suffered.

From the report:

Between 2001 and 2005, Chinese manufacturing exports to the United States expanded at an average annual rate of 24 percent, while Mexico’s export growth decelerated sharply from about 20 percent a year to 3 percent on average each year over the same period. As a result, China’s share of U.S. manufacturing imports almost doubled by 2005, eroding the previous gains in market share by Mexico (see Chart 1).

Click to enlarge 

Share-of-US-Manufacturing-Imports

In recent years Mexico has been slowly regaining its lost manufacturing capacity as U.S. firms shift production to the country from China and other countries. This shift can be attributed to two reasons: labor cost and transportation cost.

Mexico-China-Wages-Comparison

The above chart shows that wages in China are rising yearly and is getting closer to Mexican wages. Wages in the manufacturing sector in Mexico has remained fairly stable over the years while wages in China has been increasing. So China is becoming less competitive for U.S. firms.

Another factor that makes Mexico more attractive to U.S. companies is transportation costs. Since Mexico is much closer to the U.S. than China, and a stable rail and road network exists between the two countries costs of shipping goods from Mexico to the U.S. is lower. Shorter distance also means that goods can reach U.S. destinations faster from Mexico than transported by ships from China. Unless wage inflation in China stabilizes manufacturing firms may continue to move out to other countries including Mexico, Vietnam, Philippines, etc. From an investment perspective, it is wise to keep on the Mexican economy and equities.

Mexican-Import-Costs

 

Source: The Comeback by Herman Kamil and Jeremy Zook, Finance & Development, march 2013,  IMF

Related ETFs:

iShares MSCI Mexico Capped Investable Market (EWW)
iShares FTSE/Xinhua China 25 Index (FXI)

Disclosure:  No Positions

The Largest US Companies By Revenue 2012

The largest U.S. companies from the Fortune Global 500 list for last year are listed below. These firms were ranked based on their revenues:

 

Source: Fortune 500, Fortune

Of the 500 firms in the list, 132 are from the U.S. Exxon Mobil(XOM) took the top rank followed by Walmart Stores(WMT), Chevron(CVX), ConocoPhillips (COP) and General Motors(GM) among the top five. U.S. Postal Service was ranked at 42 with a revenue of $65.0 billion. UPS(UPS) and FedEx(FDX) took the 54th and 73rd spots.

Ten companies from the above list are listed below for further research:

1.Company: Emerson Electric Co (EMR)
Current Dividend Yield: 2.90%
Sector: Electrical Equipment

2.Company: ConocoPhillips(COP)
Current Dividend Yield: 4.33%
Sector: Oil, Gas & Consumable Fuels

3.Company: American Express Co (AXP)
Current Dividend Yield: 1.33%
Sector: Consumer Finance

4.Company: Abbott Laboratories(ABT)
Current Dividend Yield: 1.67%
Sector: Pharmaceuticals

5.Company: Mondelez International Inc (MDLZ)
Current Dividend Yield: 1.82%
Sector: Food Products

6.Company: Caterpillar Inc (CAT)
Current Dividend Yield: 2.40%
Sector: Machinery

7.Company: Schlumberger NV (SLB)
Current Dividend Yield: 1.70%
Sector: Energy Equipment & Services

8. Company: Fluor Corp (FLR)
Current Dividend Yield: 1.01%
Sector: Construction & Engineering

9.Company: Johnson & Johnson (JNJ)
Current Dividend Yield: 3.09%
Sector: Pharmaceuticals

10.Company: General Dynamics Corp (GD)
Current Dividend Yield: 3.25%
Sector: Aerospace & Defense

Note: Dividend yields noted are as of Mar 21, 2013

Disclosure: No Positions

To download the complete Fortune 2012 list in Excel click here.

Downloads Page Added !

Recently I added a “Downloads” tab on this site.

Download-Page

On this page you can download many documents such as a list of NYSE stocks, OTC stocks, Fortune Global 500 and Fortune 500 lists in excel and other formats.

Fortune 500 US lists from the latest to all the way up to 1955 are listed here.

More documents for download will be added on a regular basis.