Page 5 - DMEA Week 06 2022

DMEA COMMENTARY DMEA

Aramco and Norinco
signed their original
deal for the Panjin
refinery in 2017

said, noting that the PIF would use the proceeds The combination of successful asset monetisa-
to invest both locally and internationally. tion and resurgent oil prices have flipped the nar-
The PIF has plans in place that will see it rative in recent months, though, and Aramco has
spend SAR3 trillion ($800bn) into new sectors returned to spending heavily as it eyes expansion
over the coming decade while creating 1.8mn throughout the value chain.
direct and indirect jobs by 2025. While it works to expand domestic upstream
Ahead of the IPO, Aramco promised to pay oil production, the company has also resumed
out a $75bn dividend in each of the first five years its global refining expansion programme, having
of trading. While this corresponds to just $1.3bn last month acquired stakes in a refinery and retail
leaving state coffers, weak oil prices saw the assets belonging to Poland’s Grupa Lotos.
company resort to tapping the market to raise This week, various reports cited Aramco
cash to ensure it can cover its $18.75bn quarterly sources as saying that the company has resumed
payments. talks to build a $10bn refining and petrochemi-
This included the almost $28bn Aramco cals complex at Panjin in north-eastern China’s
raised last year by leasing out and then leasing Liaoning Province.
back 25- and 20-year stakes in first its oil pipe- Originally announced in 2017 as part of
lines and then gas pipelines businesses. China’s One Belt, One Road international infra-
structure initiative, Aramco agreed a deal with
New gas pipeline partner China North Industries Group Corp. (Norinco)
The latter deal was further bolstered this week for the development of facilities with a projected
when the Keppel Infrastructure Trust’s fund refining capacity of 300,000 bpd alongside
management arm said it would invest $250mn 1.5mn tonnes per year of ethylene and 1.3mn
in a special purpose vehicle which agreed in tpy of paraxylene.
December to acquire a minority, non-operated In line with the company’s strategy of increas-
stake in Aramco Gas Pipeline Co. (AGPC). ing the number of crude outlets dedicated to its
Aramco had signed a 20-year agreement with crude production, Aramco intends to supply
a the SPV consortium jointly led by BlackRock 70% of the facility’s feedstock, taking a 35% stake
Real Assets and Hassana, the investment man- in the project, with Norinco subsidiary Huajin
agement arm of the kingdom’s General Organi- holding 36% and the local-government owned
sation of Social Insurance (GOSI) worth $15.5bn Sincen the remaining 29%.
which the Saudi firm would receive up front, The Saudi firm’s participation came to an end
“further strengthening its balance sheet”. in 2020 when it slashed capital expenditure in
The investors will hold a 49% stake in the new response to low oil prices and the COVID-19
AGPC, with the parent firm owning the majority outbreak, and its stake was transferred to Hua-
share. jin, which established a joint venture with Sincen
By leasing the rights to the gas network and late that year.
then leasing these rights back to Aramco, the Quoting sources close to the project, Argus
investors will be entitled to receive a pipeline Media said that the JV kicked off construction of
utilisation tariff from Aramco, which will retain the facility in Q3 2021, with the petrochemical
full ownership and operational control of the units having now been expanded to a planned
pipeline network. 1.65mn tpy of ethylene and 2mn tpy of parax-
The deal follows the closure in June of a sim- ylene, raising the cost of the project to just under
ilarly structured deal for a 49% stake in Aramco $12bn.
Oil Pipelines Co. (AOPC) which brought the While the talks may yet have a long way to
company an upfront payment of $12.4bn for a go, it appears that Aramco is once again pressing
25-year lease. The stake in the oil pipeline busi- ahead with its long-held strategy of raising its
ness was leased to a consortium led by US-based gross global refining footprint to 8-10mn bpd.
EIG Global Energy Partners and including Abu Should it assume the 35% stake it handed back
Dhabi sovereign fund Mubadala, China’s Silk to Huajin in 2020 – and complete several other
Road Fund and Hassana. planned downstream deals (see table) – the Pan-
jin facility would take Aramco’s gross refining
Chinese refinery capacity beyond 7.8mn bpd.™

Week 06 10•February•2022 www. NEWSBASE .com P5