Page 4 - DMEA Week 41

DMEA COMMENTARY DMEA

Aramco to stick

with oil as it plans

divestments

Saudi Aramco has said it intends to increase oil capacity and continue its interest in LNG

exports, while admitting that it will seek to market assets to optimise its portfolio

SAUDI ARABIA SAUDI Aramco, the world’s largest producer of divesting shares in some of its domestic assets.
oil, remains committed to facilitating increased Given the sensitivity of the company’s conces-
WHAT: crude output despite the challenges the company sion covering sole rights to develop the King-
Aramco intends to double and the industry as a whole have faced this year. dom’s hydrocarbon resources, we can be all but
down on oil and gas, Sources were quoted by Reuters as saying that certain that such agreements will not cover the
while potentially raising the company intends to fulfil its threat from early upstream.
capital by selling stakes this year to raise oil production capacity from the Meanwhile, an agreement was reported to be
in non-core assets. current 12mn barrels per day to 13mn bpd. in place earlier this year to sell a stake in the com-
The industry had long been fascinated with pany’s pipeline business to a group of local banks
WHY: Aramco’s, and thus Saudi Arabia’s, spare capacity. for up to $10bn. However, appetite for this deal is
The company has faced While the company pumped at levels of around understood to have diminished somewhat amid
a tumultuous year and 9.5-10mn bpd, much was made of the purported concern from the MoE and further due diligence
could monetise assets 2.5mn bpd of extra capacity that could be uti- is being carried out.
to ensure it can meet its lised if required. This leaves the downstream. While the scale
dividend obligations. In Q1 this year, Aramco put its money where of Saudi Arabia’s downstream infrastructure
its mouth was when called upon by the Minis- is impressive, it remains a cost centre. Aramco
WHAT NEXT: try of Energy (MoE), which dictates crude pro- wholly owns 1.235mn bpd of refining capacity,
The sale of domestic duction levels, to ramp up output from 8.9mn while its domestic joint ventures have a com-
assets is being bpd. This resulted in a single-day oil production bined slate of 1.67mn bpd, though losses were
mooted, while talks are record being set in April of 12.1mn bpd. How- mounting even before the coronavirus (COVID-
understood to remain ever, Middle East Oil & Gas (MEOG) under- 19) pandemic. PetroRabigh, for example, which
ongoing for the sale of an stands from Aramco sources that this included Aramco owns in collaboration with Japan’s
Asian refinery. producing ‘over capacity’ at several assets, Sumitomo Chemical, booked a loss of $384mn
including Manifa, Safaniyah and Shaybah. during Q2 and the partners last week agreed to
In addition, the sources said that the 12.1mn provide the facility with a $2bn loan.
bpd figure also included flows from storage facil- Aramco’s wholly owned domestic refiner-
ities; meanwhile, a single-day record was also set ies are Ras Tanura, Riyadh, SASREF in Jubail,
during the quarter for crude loading at around Yanbu’ and the long-awaited Jazan. It is not yet
15.5mn barrels. known whether a stake in any of these might be
made available, but attracting the interest of for-
Divestments eign investors is likely to require increased flows
Meanwhile, in an interview with Energy Intel- to export markets to profit from higher prices.
ligence last week, Aramco CEO Amin Nasser Meanwhile, MEOG understands that talks
said that he saw “greater opportunities for us to remain ongoing with potential investors for the
squeeze more value from our existing portfolio sale of a JV refinery in Asia, with details scant
and further optimise it”. given the confidentiality of discussions.
He added: “We’re going to do it right and will
make sure what’s executed … is in line with our Why now?
long-term view – the strategy of retaining our One of the key promises ahead of the company’s
core businesses in-house and what can be opti- initial public offering (IPO) in December last
mised with our partners. This involves a careful year was the $75bn dividend to shareholders –
review process that will take some time.” $18.75bn per quarter.
The company is understood to be considering With 98.5% of the company remaining under

P4 www. NEWSBASE .com Week 41 15•October•2020