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. ™

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