Page 5 - AsianOil Week 33 2021

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shares in Aramco would be sold in order to expand the PIF. “There will be [more] Aramco share offerings in the coming years, and this cash will be transferred to the Public Invest- ment Fund,” he said, noting that the PIF would use the proceeds to invest both locally and internationally.
Deal Progress
During its Q2 earnings call earlier this month, Aramco said that it was continuing to carry out due diligence on the proposed RIL deal.
This follows around two years of protracted negotiations between the two companies since news of the planned investment was announced in August 2019.
At the time, RIL’s chairman and managing director Mukesh Ambani said: “Saudi Aramco and [RIL] have agreed to form a long term partnership in our oils to chemicals division [...] This signifies the perfect synergy between the world’s largest oil producer and world’s biggest integrated refinery and petrochemicals complex.”
He added that while the deal was subject to due diligence, by ensuring Aramco crude is used as feedstock for the refinery, the deal could pay for itself within 18 months.
Momentum has been building with Aramco’s chairman Yasir Al-Rumayyan appointed to RIL’s board of directors in June in a move seen as a precursortothedealmovingforward.
Strategic move
Aramco has a long-stated aim of achieving a global refining slate of 8-10mn bpd. At year-end 2020, it had a gross refining capacity of 6.4mn bpd and a net capacity of 3.6mn bpd.
Reliance O2C owns and operates a refining slate of 1.82mn bpd comprised of the world’s largest refining complex at Jamnagar and another sizeable facility located within the Jam- nagar Special Economic Zone. With one move, the acquisition would increase Aramco’s partic- ipated refining capacity to 8.6mn bpd and its net refining capacity to 4.3mn bpd once the Jazan refinery on Saudi’s Red Sea coast reaches its 400,000 bpd capacity later this year and the trou- bled Pengerang Petrochemical Co. (PRefChem)
facility in Malaysia is finally commissioned. The Indian firm also has petrochemicals assets, a bulk wholesale marketing business, a fuel retail arm which comprises a 51% stake in a JV with BP and oil trading subsidiaries in Singa-
pore and the UK.
With Ambani saying in 2019 that RIL would
agree to a long-term purchase of 500,000 bpd of Aramco crude, the move further supports the Saudi firm’s strategic objectives, in this case by providing another dedicated crude outlet to which it can expand guaranteed crude place- ment in the Indian market.
Expanding dedicated outlet options is central to Aramco’s plans to shelter its key crude oil rev- enue stream from market volatility. Under the terms of the 2018 deal to acquire a stake in PRef- Chem, Aramco supplies 50% of the refinery’s crude feedstock with the option of increasing it to 70%.
According to the firm’s 2020 annual report, it supplied an average of 54% of crude feedstock to its international JV refineries, outstripping its weighted average participation in these facilities of 42%.
“This crude placement provides significant benefits to Aramco’s operations, including a secure and reliable supply of high-quality crude oil, which helps to ensure a secure and reliable supply of refined products to its downstream customers,”thereportsaid.
Crude sales to wholly-owned and affiliated refineries averaged 3.5mn bpd during 2020, accounting for 37% of its total 9.2mn bpd aver- age crude production.
If we consider increased processing at Jazan and assume the RIL deal goes ahead, PRefChem resumes operations and flows to domestic refin- eries are maintained, Aramco’s sales to its affil- iated refineries could increase to nearly 5mn bpd in 2022, accounting for more than half of its crude sales without domestic refineries oper- ating at full tilt.
As Aramco contends with concerns about oil demand, it is doing its level best to future-proof its crude operations while forging strategic rela- tionships with some of its most important con- sumer nations.™
Week 33 19•August•2021 w w w . N E W S B A S E . c o m P5