Dubai (Platts)--26Mar2013/1034 am EDT/1434 GMT

Saudi Arabian customs officials have foiled an attempt to smuggle 3.255 million kg (equivalent to 27,300 barrels) of refined oil products out of the eastern port of Dammam, capital of the kingdom's oil-rich Eastern Province, the official Saudi Press Agency SPA reported Tuesday.

The agency quoted the head of customs at Dammam's Gulf King Abdul Aziz Port, Othman Al-Ruqai, as saying that the smugglers had altered documentation to try to disguise the nature of the products being shipped out of the Persian Gulf port illegally.

It said the products were discovered inside 296 containers in the past two months.

The official announcement was unusual in Saudi Arabia, where smuggling of oil products has been known to occur across its borders but is not usually reported by Saudi media.

Saudi Arabia is the world's largest oil exporting nation. The biggest oil producer in OPEC, the kingdom's output is estimated by Platts at 9.2 million b/d, according to the last survey of OPEC's production.

Saudi Arabia in 2010 established a committee to investigate a widespread oil smuggling operation involving the sale of discounted oil and oil products to Europe that a Saudi newspaper said at the time had been going on for over a decade.

The newspaper, Okaz, said at the time that unnamed companies were buying surplus oil at nominal prices from state-owned oil giant Saudi Aramco claiming the oil would be used for domestic production of such products as aromatics and paints.

Instead, the oil was being sold to unidentified European countries at international prices, the paper quoted a reliable source as saying in the exclusive report.

The illicit trade is encouraged by low domestic prices for crude oil and oil products in the kingdom with Saudi Aramco providing local industry with feedstock at far below international prices.

One method used in the past to smuggle oil products across the Saudi border was trained donkeys which would be loaded with oil products and sent into Yemen. The donkeys would return with a load of Qat, the narcotic plant that is grown in abundance in Yemen.

Saudi Arabian oil minister Ali Naimi has called for action to rationalize energy consumption in the kingdom and bring prices up to more realistic levels saying that oil exports would be affected if domestic demand growth continued unchecked.

--Kate Dourian, kate_dourian@platts.com
--Edited by Jonathan Dart, jonathan_dart@platts.com

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