Page 6 - FSUOGM Week 42 2019

FSUOGM COMMENTARY FSUOGM
Broad deal cements Saudi- Russian relations
A raft of major deals have shown the close ties enjoyed by Moscow and Riyadh, and Russian investors are lining up ahead of the Aramco public offering
SAUDI ARABIA
WHAT:
Saudi Arabia and Russia announced a string of energy sector deals during a state visit by Vladimir Putin.
WHY:
The agreements build on plans announced last year, with much of the focus on oil services and the downstream sector.
WHAT NEXT:
There are plans for downstream facilities to be built in both countries with state and private firms collaborating, while Russian money will likely feature heavily in the Aramco IPO.
A state visit to Saudi Arabia by Russian Presi- dent Vladimir Putin provided the backdrop for a series of significant deals between active players in the two countries’ energy sectors.
The deals were signed during the Saudi-Rus- sian CEO Forum in Riyadh, with the highlight being the agreement for the Russian Direct Investment Fund (RDIF), Saudi Aramco and the Public Investment Fund (PIF) to acquire Rusna- no’s 30.76% stake in services firm Novomet.
In an interview with Al Arabiya, Putin con- firmed that privately owned Russian petrochem- icals company Sibur Holding intends to build a new petchems facility in Saudi as part of a $1bn investment.
Meanwhile, a separate deal was announced between the sovereign wealth fund (RDIF), Saudi Basic Industries Corp. (SABIC) and Rus- sian private equity firm ESN to invest in the design, development and operation of a 2mn tonne per year (tpy) methanol plant in Russia’s Amur region.
Tactical tie-up
Speaking to Al Arabiya ahead of his visit, Putin said: “We consider Saudi Arabia a friendly nation.Ihaveverygoodrelationswithboththe King [Salman bin Abdulaziz] and the Crown Prince [Mohammed bin Salman].”
While the pair compete for influence in the tumultuous global oil market, relations appear to be warm, particularly between Putin and MbS. Considering the recent OPEC/non-OPEC sup- ply cut agreements and the potential involve- ment of Russian investors in the much-discussed initial public offering (IPO) of Saudi Aramco, ties between Moscow and Riyadh appear stronger than ever.
This builds on the traction achieved in Octo- ber 2018 when, during a landmark visit to Russia by King Salman, a series of framework agree- ments were signed, signalling co-operation between their respective parastatals and state investment funds in petrochemicals, trading and gas.
One of the memoranda of understanding (MoUs) called for Aramco, the RDIF and Sibur “to jointly evaluate potential opportunities in the petrochemicals sector”, adding flesh to plans first
discussed in 2017.
Russian Energy Minister Alexander Novak
revealed ahead of the deal’s signature that this would include plans for a joint project worth more than $1bn to develop a synthetic rubbers plant in Saudi.
The location of the proposed joint ven- ture was undisclosed but Aramco is at present especially eager to attract international petro- chemicals investment at the planned new Jazan Economic City in the kingdom’s far south-west as the company’s refinery at the site belatedly nears completion.
An MoU was signed with Chinese state enti- ties in 2017 specifically targeting the fledgling downstream hub and a multi-billion dollar Chi- nese project was subsequently unveiled.
An earlier MoU between Aramco and Sibur included the Saudi firm’s chemicals-focused compatriot SABIC in the mooted co-operation.
Of the Amur project, ESN chairman Grigory Berezkin said: “Due to sizable Gazprom invest- ments in developing gas infrastructure and the introduction of government measures to attract investment, there is a tremendous opportunity for implementation of world-class investment projectsintheRussianFarEast.”
Novak also said at the time that Russia gas producer Novatek was in talks for Saudi inves- tors to take part in its Arctic LNG-2 project, a fol- low-up to its $27bn plant in the Yamal Peninsula.
Strength in services
The Novomet deal also builds on plans set out last year. In October, RDIF was also said to be enlisted in Riyadh’s efforts to use Aramco’s own needs as a springboard to expand and localise the kingdom’s energy services sector.
An MoU between the two parties and Saudi Arabia’s Public Investment Fund (PIF) called for joint investment in energy services and manufacturing. It was also said to pave the way for “new business development in ... the Ras al-Khair maritime yard development and poten- tial partnerships in the Energy Industrial City”.
Aramco is jointly developing an estimated $5.2bn offshore services complex at Ras al-Khair in the Eastern Province with local, UAE and South Korean investors.
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w w w . N E W S B A S E . c o m Week 42 23•October•2019