Page 16 - DMEA Week 28 2020

DMEA PETROCHEMICALS DMEA
Aramco to restructure downstream business
SAUDI ARABIA
Aramco wants to add value to its resources and diversify away from oil sales.
SAUDI Aramco has announced plans to restruc- ture its downstream business, aimed at maxim- ising value and increasing its international clout.
e Saudi oil giant plans to nish the process by the end of the year, which will involve splitting the business into four units covering fuel, includ- ing re ning, trading, retail and lubes, chemicals, power, and pipelines, distribution and terminals. Three corporate functions – manufacturing, strategy and marketing, and a liates a airs – will support these units.
“I am excited that we are launching a new operating model that we believe will help stream- line our operations and reinforce our position as a major global energy and petrochemicals player,” Aramco’s downstream senior vice pres- ident Abdulaziz Al Gudaimi commented. “ is reorganisation is yet another step in Aramco’s strategy to develop a global integrated down- stream business that enhances our competitive- ness by maximising our value capture across the hydrocarbon value chain.”
Aramco wants to build up its downstream operations at home and overseas, in order to add value to its resources and reduce its reliance on crude oil sales. It aims to double its re ning capacity to 10mn barrels per day (bpd), and recently closed the purchase of a 70% stake in Saudi petrochemicals giant
SABIC from the Public Investment Fund (PIF). It will pay $69bn for the stake, but in stages until April 2028.
Combined, the two companies can produce almost 90mn tonnes per year of petrochemicals. Aramco’s restructuring move is also driven by Riyadh’s new tax regime, which requires it to “consolidate its downstream business under the control of one or more separate, wholly-owned subsidiaries,” it said in the prospectus for its ini-
tial public o ering (IPO) last year.
From January 1, the government has applied
a 20% general corporate tax rate to Aramco, which is the same rate paid by downstream busi- nesses, instead of the 50-85% rate of oil and gas producers. Aramco will have to consolidate its downstream operations by the end of 2024, or face retroactive taxes at the higher rate.
Despite Aramco’s takeover, SABIC will remain listed separately on Saudi Arabia’s Tad- awul stock exchange.
Aramco restructured its chemicals trading division in January last year and established a new unit, Aramco Chemicals (ACC), that sells and distributes polymers and chemicals manu- factured by Aramco’s joint ventures such as Pet- roRabigh, with Japan’s Sumitomo. PetroRabigh is also still listed, potentially complicating the consolidation move even further. ™
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Week 28 16•July•2020