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Abu Dhabi, UAEThursday 15 November 2018

Aramco’s potential Sabic stake acquisition could impact IPO, says CEO

Saudi oil major aims to convert two to three million barrels of oil products per year into chemicals to diversify its operations

Oil tanks at the Saudi Aramco headquarters at Dammam city. The company's possible acquisition of a stake in Sabic could affect the timing of its planned partial IPO, Aramco chief executive Amin Nasser said. Ali Jarekji / Reuters
Oil tanks at the Saudi Aramco headquarters at Dammam city. The company's possible acquisition of a stake in Sabic could affect the timing of its planned partial IPO, Aramco chief executive Amin Nasser said. Ali Jarekji / Reuters

Saudi Aramco’s potential acquisition of a stake in Saudi Basic Industries Corporation, the Middle East biggest petchem company, could delay the planned listing of 5 per cent of the world's biggest oil producer, its chief executive said.

“If the deal is completed, with relevant regulations taken into account, it will definitely affect the timeframe for the partial IPO [initial public offering] of Saudi Aramco,” Amin Nasser said in an interview with Al Arabiya TV, the content of which was circulated by the kingdom’s government communications department on Saturday. “When Saudi Aramco is ready, the decision of going ahead with the IPO is for the state to make.”

Saudi Arabia’s oil minister Khalid Al Falih said in May the planned IPO – which would be the world’s biggest ever listing – will “most likely” happen in 2019, later than the original target of the second half of 2018.

Talks to acquire part of Sabic, which are in the preliminary stage, “must take their time”, Mr Nasser added. “The regulations of the financial markets pertaining to the acquisition processes must be taken into account,” he told Al Arabiya.

Discussions with Sabic’s majority shareholder the Public Investment Fund (PIF) – the country's sovereign wealth fund – to acquire a stake in Sabic are part of Aramco’s strategy to expand its downstream operations, and in particular ramp up involvement in the global petrochemicals market.

The company aims to convert two to three million of oil products per year into chemicals in the long term to transform Aramco from being “a world leader in energy to a world leader in energy and chemicals”, Mr Nasser said. Aramco currently pumps around 10 million bpd of oil.

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The chemicals sector is growing at roughly 3 per cent per year and is set to expand by 50 per cent over the next 20-25 years, he added. Aramco plans to double its petrochemicals production by 2030, to increase the value of each barrel of oil produced and diversify the economy, enabling the kingdom to take a bigger bite of global energy markets beyond transportation, where most oil is consumed.

“To achieve this goal we have two options: either launching new projects, such as Sadara [Aramco’s petchem joint venture with Dow in the kingdom], or through acquisitions,” Mr Nasser said in the interview. “Such a transformation would offer many integration benefits and growth opportunities, as well as added value and economic diversification.”

Saudi Aramco has already taken steps to expand into petrochemicals, such as its acquisition of 50 per cent of German chemicals company Lanxess two years ago, and through its $5bn PetroRabigh II and Sadara projects to help it boost refining capacity to between eight and 10 million barrels per day, from five million bpd at present.

In November, Aramco and Sabic signed an agreement to build a $20bn oil-to-chemicals facility on the Red Sea Coast of Saudi Arabia – the world’s largest such refinery under the plans. Aramco is now eyeing further acquisitions and collaboration opportunities in the chemicals sector.

The possible deal with Sabic, and any further deals with other chemicals firms will "expand the manufacturing chain to include high-value specialised products, as well as achieving the highest possible added value of each oil barrel and [measure of] gas the company produces,” Mr Nasser said.