Page 5 - DMEA Week 32 2021

DMEA COMMENTARY DMEA
a duration of 25 years, Nasser said that the com- pany would “continue to move forward” with several strategic initiatives including “maximiz- ing the value” of its assets.
Having borrowed heavily to cover the $69bn acquisition of chemicals specialist Saudi Arabia Basic Industries Co. (SABIC) and to maintain dividend payments, Aramco’s new CFO Ziad al-Murshed sounded buoyant as the company appears set to cover at least the Q2 payment without returning to debt markets.
“It’s important to note that during the down- turn last year we maintained our dividend,” he said, adding: “For now our dividend is staying at the normal level for the second quarter but, again, we’ll advise later this year whether we’ll be stickingtotheordinarydividendordoingmore.”
In reality, with 98.5% of the company remain- ing in the hands of the Saudi government, only $281mn of the quarterly total will leave state cof- fers, however, such positive performance may lead those in Dhahran to consider floating addi- tional shares in the coming years.
Downstream update
The integration of SABIC and its 30,000-plus employees is an ongoing process with the petchem specialist to become Aramco’s chem- icals arm. As part of this, the parent has trans- ferred marketing and sales responsibility for petrochemicals, polymers and fuels to and from its Aramco Trading Co. (ATC) subsidiary and SABIC as it seeks to capture “value-adding synergies”.
These moves give ATC responsibility for fuels, aromatics and methyl tert-butyl ether (MTBE) with SABIC focusing on polymers and derivative products.
Meanwhile, with the company’s whol- ly-owned and participated refining capacity having surpassed 7mn bpd, the company’s long- stated strategy of achieving a global refining slate of 8-10mn bpd now appears to focus solely on
plans to acquire a 20% stake in India’s Reliance Industries’ oil-to-chemicals (O2C) division.
Reliance O2C includes refining and petro- chemicals assets, its bulk wholesale marketing business, its fuel retail arm which comprises a 51% stake in a joint venture with BP and oil trading subsidiaries in Singapore and the UK. Perhaps its most significant asset is the world’s largest refining complex at Jamnagar which has a capacity of 1.24mn bpd.
Aramco said last week that it continues to carry out due diligence on the proposed $15bn investment, which would value the company at $75bn. This was preceded by 18 months or so of negotiations and periods of cooling off amid market volatility after the company signed a let- terofintent(LoI)inAugust2019topurchasethe stake.
Reliance’s chairman and managing director Mukesh Ambani added that as part of the deal, his company would agree to a long-term pur- chase of 500,000 bpd of Aramco crude, aiding Aramco’s strategic objective of guaranteeing crude placement in overseas markets.
Ambani said at the time: “Saudi Aramco and Reliance have agreed to form a long term partnership in our oils to chemicals division [...] This signifies the perfect synergy between the world’s largest oil producer and world’s biggest integrated refinery and petrochemicals complex.”
He added that while the deal was subject to due diligence, by ensuring Aramco crude is used as feedstock for the refinery, the deal could pay for itself within 18 months.
In June, Aramco’s chairman Yasir Al-Ru- mayyan was appointed to Reliance’s board of directors as a precursor to the deal moving forward.
Following 12 months or so of financial restraint by Aramco, the latest results may even be encouraging enough to return to its big spending ways.™
Week 32 12•August•2021 w w w . N E W S B A S E . c o m P5