Page 7 - AsianOil Week 36
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providing a significant hedge against the oil mar- ket fluctuations of the past few years.
Crude supply agreements have been a central feature of the company’s international invest- ment projects, and the prospectus noted that Saudi oil accounted for 68% of the feedstock adsorbed by its international refineries.
In August, perhaps the most significant move came by way of a provisional agreement to acquire a 20% stake in Indian company Reliance Industries Ltd’s (RIL) oil-to-chemicals division, which includes the world’s largest refinery.
The deal was announced by RIL chairman Mukesh Ambani during the company’s AGM in Mumbai. With RIL’s OTC division valued at $75bn, Aramco is expected to pay $15bn to acquire the 20% interest in the firm’s refining, petrochemicals and fuels marketing businesses.
Meanwhile, a week later, Aramco’s joint venture integrated downstream project with Malaysia’s Petronas reported that it had restarted a crude distillation unit (CDU) at the complex in Johor.
The Pengerang Refining & Petrochemical Co. (PRefChem) is part of the broader $27bn Refinery & Petrochemical Integrated Project (RAPID), which is a 50:50 JV between the two companies in Pengerang.
IPO focus
Aramco has also been spending big in the Americas with the acquisition of the US’ Port Arthur refinery as well as nearby
petrochemical projects and reports circulating that it is considering buying up downstream assets in Brazil. Talks ended without success for Aramco’s US subsidiary Motiva to buy Curacao’s Isla plant earlier in the year.
All of this plays well into the aforementioned downstream strategy, but is also likely to be highly supportive of a higher company valuation when it comes time for the IPO.
Aramco CEO Amin Nasser said this week that the company is “ready” for the listing and it seems that around 1% of the firm will now be floated on the local Saudi stock exchange, with a larger stake to be offered on an overseas market. Presumably this will be the remaining 4% of the proposed 5% total.
The government and corporate reshuffle has perhaps attracted a lot of attention away from Aramco’s moves in the downstream, but once these deals are signed and current developments reach fruition, the firm will be the single largest oil refiner in the world. With Aramco having tied in feedstock supply deals to most agreements and its trading arm now starting to flex its mus- cles, the company will be leveraging its position as the world’s largest exporter to create down- stream economies of scale around the globe.
Even though the 5% stake that will be up for grabs when Aramco lists will not cover any of the concession for upstream production, the capabilities of “Aramco downstream” are enough to make even the most hawkish inves- tor take notice.
Week 36 11•September•2019 w w w . N E W S B A S E . c o m P7
