Page 11 - MEOG Week 29

MEOG Pro J e C ts & C om Panies MEOG

Aramco to restructure

downstream business

saudi araBia SAuDI Aramco has announced plans to restruc- company continues to rationalise its budget in
ture its downstream business, aimed at maxim- the wake of the combined impact of the oil price
ising value and increasing its international clout. crash (which it helped to cause) and depressed
The Saudi oil giant plans to finish the process demand because of the COVID-19 outbreak.
by the end of the year, which will involve splitting Aramco reduced its 2020 spending by around
the business into four units covering fuel, includ- 33% as it sought to shelter operations from these
ing refining, trading, retail and lubes, chemicals, external factors. In addition, the company has
power, and pipelines, distribution and terminals. slowed the pace of downstream investments and
Three corporate functions – manufacturing, is understood to be shopping at least one of its
strategy and marketing, and affiliates affairs – overseas refineries amid disastrous refining per-
will support these units. formance and chemicals margins.
“I am excited that we are launching a new Aramco’s restructuring move is also driven
operating model that we believe will help stream- by Riyadh’s new tax regime, which requires it to
line our operations and reinforce our position “consolidate its downstream business under the
as a major global energy and petrochemicals control of one or more separate, wholly-owned
player,” Aramco’s downstream senior vice pres- subsidiaries,” it said in the prospectus for its ini-
ident Abdulaziz Al Gudaimi commented. “This tial public offering (IPO) last year.
reorganisation is yet another step in Aramco’s From January 1, the government has applied
strategy to develop a global integrated down- a 20% general corporate tax rate to Aramco,
stream business that enhances our competitive- which is the same rate paid by downstream busi-
ness by maximising our value capture across the nesses, instead of the 50-85% rate of oil and gas
hydrocarbon value chain.” producers. Aramco will have to consolidate its
Aramco wants to build up its downstream downstream operations by the end of 2024, or
operations at home and overseas, in order to face retroactive taxes at the higher rate.
add value to its resources and reduce its reliance Despite Aramco’s takeover, SABIC will
on crude oil sales. It aims to double its refining remain listed separately on Saudi Arabia’s Tad-
capacity to 10mn barrels per day (bpd), and awul stock exchange, along with its 33,000
recently closed the purchase of a 70% stake in employees.
Saudi petrochemicals giant SABIC from the Aramco restructured its chemicals trading
Public Investment Fund (PIF). It will pay $69bn division in January last year and established a
for the stake, but in stages until April 2028. new unit, Aramco Chemicals (ACC), which sells
Combined, the two companies can produce and distributes polymers and chemicals manu-
almost 90mn tonnes per year of petrochemicals. factured by Aramco’s joint ventures such as Pet-
However, Middle East Oil & Gas (MEOG) roRabigh, with Japan’s Sumitomo. PetroRabigh
understands that all downstream invest- is also still listed, potentially complicating the
ments have effectively been put on hold as the consolidation move even further.™

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