Page 10 - DMEA Week 09 2020

DMEA PETROCHEMICALS DMEA
Aramco gets EU greenlight for SABIC takeover
SAUDI ARABIA
Aramco will become a more integrated, diversifed player.
SAUDI Aramco on February 28 won the uncon- ditional approval of the European Commission to acquire a 70% stake in Saudi petrochemicals giant SABIC for $69bn. The shares were bought from Saudi Arabia’s Public Investment Fund (PIF).
Aramco is keen to diversify its predomi- nately oil-based revenues by developing its gas and petrochemicals operations. SABIC has an annual petrochemicals production capacity of 62mn tonnes, dwarfing Aramco’s own capacity of 17mn tonnes.
By bringing the two companies closer together, Riyadh wants to cut costs and create synergies, helping its petrochemical exports compete better on international markets. The pair already work closely, with Aramco suppling SABIC’s domestic plants with subsidised gas feedstock.
“We are no longer the oil and gas sector,” Saudi Energy Minister Abdulaziz bin Salman told an Aramco meeting in Dharhan earlier this month, according to local media reports. “Power, chemicals, petrochemicals, crude oil, refining are all considered the energy sector and this is why Aramco will be owner of the government shares in SABIC soon,” he said.
Aramco has said it expects to close the trans- action sometime before the end of this year. Clo- sure is likely to come shortly, as the EU approval means the deal has now received all necessary clearance from antitrust regulators.
SABIC has a significant international busi- ness, with operations in more than 50 countries. In Europe it is the top producer of ethylene, with facilities in Germany, the Netherlands and Ireland.
Aramco too wants to build up its overseas activities, particularly in the US and China. It recently broke ground on a new petrochemical joint venture project with ExxonMobil in the US Gulf Coast.
The SABIC deal will provide Aramco with access to new markets, while transforming the mainly upstream-focused company into a more integrated player. It may also be able to boost profits, boasting a larger range of value-added downstream products. This said, the takeover comes at a time when the global market for pet- rochemicals is reeling from oversupply and a rut in economic growth. SABIC posted its first quarterly loss in more than a decade in October through December, as a result of weak prices and write-downs.
The ethane contained in gas serves as the primary feedstock for petrochemicals in Saudi Arabia. Therefore the industry’s development dovetails with Aramco’s increased focus on gas exploration and production. Last month it obtained regulatory approval to exploit the Jafu- rah gas field, estimated to hold 5.7 trillion cubic metres of gas, at a cost of $110bn. The field’s gas will be used for domestic use, including as petro- chemical feedstock. ™
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w w w . N E W S B A S E . c o m Week 09 05•March•2020