Page 11 - MEOG Annual Review 2021

MEOG APRIL MEOG

Aramco’s pipeline
network.

Source: Aramco Prospectus

Apollo Global Management, BlackRock, in late March.
Brookfield Asset Management, Global Infra-
structure Partners (GIP) and China Investment Strategy
Corp. (CIC) have all previously been reported as The company noted that “the transaction rep-
considering making offers. resents a continuation of Aramco’s strategy to
unlock the potential of its asset base and maxim-
Assets ise value for its shareholders,” and MEOG under-
Aramco Oil Pipelines Co.’s key asset is the mas- stands from sources familiar with proceedings
sive East-West Pipeline (EWP), which is cur- that further asset monetisation deals may be in
rently undergoing a $250mn project to increase the pipeline.
capacity from 5mn barrels per day to 7mn bpd. With ADNOC having enjoyed success with
At various points over the past two years, the this approach, it is reported to be considering
use of drag-reducing agents and “interim con- an initial public offering (IPO) of its drilling
version of NGL pipelines” allowed for a “tempo- arm. The Emirati firm’s strategy serves as the
rary mechanical capacity increase” to reach the blueprint for achieving short-term cash boosts
upper limit for short periods; however, during while retaining control over vital state assets and
2018 and 2019 flows averaged 2.1mn bpd. Aramco is understood to be plotting a similar
The conduit is vital for Aramco as it trans- course.
ports crude from the Abqaiq processing hub in Speaking to MEOG, Ian Simm, Principal
the oil-rich Eastern Province to refineries and Advisor at consultancy IGM Energy said: “Fol-
export terminals at Yanbu’ on the Red Sea Coast, lowing the ADNOC model, a logical option
and completion of the expansion project is tar- would be to sign similar arrangements for
geted in December 2021. minority shares in its five wholly owned refin-
EWP was targeted by Yemen’s Houthi rebels eries at Ras Tanura, Riyadh, Jubail, Yanbu’ and
in 2019 when the militants launched drone Jazan.” The company already has four domestic
strikes that disabled the Abqaiq plant and the refining joint ventures (JVs) – Petro Rabigh with
Khurais oilfield, taking around 5.7mn bpd off Japan’s Sumitomo Chemical Co., SAMREF with
the market. More recent attacks have focused on ExxonMobil of the US, SATORP with France’s
export infrastructure throughout the Kingdom. Total and YASREF China’s Sinopec.
It is worth noting that Aramco has assumed all However, Saudi Arabia is less appealing for
operating and capital expense risk relating to the foreign direct investment (FDI) than the UAE,
operation of the pipeline network. as was evidenced by Aramco resorting to guar-
As per Aramco’s annual report, the network anteeing a dividend of $75bn per year to share-
was key to the company placing 23% of its 9.2mn holders through the first five years after its IPO
bpd crude production and 0.1mn bpd of con- – a promise that has hamstrung the company’s
densate “to in-Kingdom wholly owned and affil- finances, leading it to tap debt markets to cover
iated refineries” in 2020. the shortfall.
Most of the Kingdom’s exports are loaded Indeed, Crown Prince Mohammed bin Sal-
from the Ras Tanura and Ju’aymah terminals on man (MbS) last week said that the state would
the Gulf coast, though Aramco has expanded forego part of its 98.27% share of the dividend
export facilities on the Red Sea in recent years, to recycle the funds through the Saudi economy
with the Yanbu’ terminal now capable of loading under the Shareek (Partner) programme.
6.6mn bpd. Riyadh is likely to continue to employ a com-
Aramco utilised it full midstream network in bination of carrot and stick initiatives if it is to
Q1 last year when it achieved a single-day crude remain competitive with its neighbour or even to
loading record of 18.8mn barrels to 15 tankers become the regional hub that it intends to be.™

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