Page 7 - DMEA Week 32
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DMEA COMMENTARY DMEA
day, down 500,000 boepd compared to the full Nasser said that talks with Reliance Industries
year average for 2019. were still ongoing regarding a $15bn deal to
Meanwhile, CEO Amin Nasser hailed the acquire 20% of the Indian firm’s oil-to-chemicals
company’s pre-eminence in the production of (OTC) business. “The work is still on. We will
both oil and gas, and Aramco has indeed made update our shareholders in due course.”
progress in the latter regard through the Fadhili Given the state of the market, it would
gas plant reaching full production capacity of appear unlikely that Aramco would rush
2.5bn cubic feet (70.8mn cubic metres) per day into such a deal and talks had already cooled
following the successful completion of commis- in recent months, despite the potential deal
sioning activities. being seen as a replacement for Aramco’s
crude oil-to-chemicals (COTC) project,
Spending which was reshaped into efforts to enhance
While Aramco reeled in its spending plans facilities at Yanbu’ refinery.
for the full year, first-half capital expenditure
amounted to $13.6bn. MEOG understands Activity
that the full-year capital programme has been As part of wide-ranging efforts to minimise the
reduced by $10-15bn in reaction to the crisis. business impact of COVID-19, Aramco delayed
Despite the reduction, the company closed by six months the Marjan and Berri crude
the acquisition of 70% stake in petrochemicals increment programmes: projects that are set to
firm SABIC from the Public Investment Fund more than double oil production capacity from
(PIF) for $69.1bn. The financing of the deal was, the assets to a combined 1.35mn bpd at a cost
however, renegotiated, allowing the balance to of around $18bn. These developments are also
be spread over the next three years. expected to result in the production of up to 2.5
While the scrutiny on spending can be attrib- bcf (71 mcm) per day of associated gas, which
uted to the company now being publicly listed, will be piped to the Berri gas plant.
or on the COVID-19 pandemic, Aramco is likely During the first half of the year, premium
to be under greater pressure to ensure it does not crude is understood to have comprised more
come up short on its highly publicised dividend than 60% of the company’s production, while
payments. With that in mind, the company the mid-year average output from the Parti-
closed a $10bn one-year loan deal earlier this tioned Neutral Zone (PNZ) was estimated at
year with a group of 10 banks and is reported to 52,000 bpd.
be in negotiations over a $10bn lease and rent- Meanwhile, work is still understood to be
back agreement with domestic banks regarding ongoing to increase the capacity of the East-West
its oil pipelines, an arrangement akin to those Pipeline from 5mn bpd to 7mn bpd.
announced for first oil, then gas by Abu Dhabi A company source, speaking to MEOG on
National Oil Co. (ADNOC). condition of anonymity, said: “It has been a year
It is little surprise, then, that aside from of ups and downs for Aramco. It started so well,
SABIC, little was mentioned of downstream, but the oil price war was a disaster, and it went
other than that “it continues to deliver on its from bad to worse as the lockdowns ruined
long-term strategy of strategic integration and demand projections. However, unlike many
diversification”. This marks a major change other of the world’s largest oil producers, it made
from 2019, when the company was in expansion a profit and stuck with its dividend commitment.
mode, first announcing the SABIC deal and buy- Having said that, part of the dip in performance
ing stakes in Hyundai Oilbank in South Korea was of Saudi Arabia’s own causing.”
and Motiva Chemicals in the US. Aramco remains a company unlike any other
In addition, no mention has been made of the and it has filled the Kingdom’s treasury in return
PRefChem facility in Malaysia, which has been for its exclusive concession to develop Saudi’s
plagued by problems over the past 18 months, world-class reserves. However, as public scru-
with fires causing fatalities and closures for tiny grows stronger, this hydrocarbon wealth is
investigations. unlikely to continue bailing Riyadh out of poor
However, speaking to reporters on August 9, decision-making.
Week 32 13•August•2020 www. NEWSBASE .com P7