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Abu Dhabi, UAESunday 18 November 2018

Saudi Aramco says in early talks to acquire Sabic stake

Plans are part of Aramco’s downstream expansion strategy, including petrochemicals

An Aramco oil refinery in Dhahran, Saudi Arabia. Aramco LPG sales to China this year  have reached 90 per cent of all shipments in 2017. Getty Images
An Aramco oil refinery in Dhahran, Saudi Arabia. Aramco LPG sales to China this year  have reached 90 per cent of all shipments in 2017. Getty Images

Saudi Aramco, the world's biggest oil producer, said on Thursday it is in early-stage discussions to acquire an interest in Saudi Basic Industries Corporation, the Middle East’s biggest chemicals firm.

“Saudi Aramco confirms it is engaged in very early-stage discussions with [sovereign wealth fund] the Public Investment Fund (PIF) regarding acquiring a strategic interest in Sabic by way of a private transaction,” the kingdom’s state oil giant said in a statement.

The discussions are preliminary and there is no certainty that any such transaction will take place, it added. Saudi Aramco has “no plans to acquire any publicly held shares of Sabic”, which is listed on the Tadawul stock exchange in Riyadh and 70 per cent owned by PIF.

Aramco said a potential acquisition would be consistent with the company’s strategy of rebalancing its portfolio by moving further into downstream sectors of oil and gas, in particular, petrochemicals, according to the statement. The company has been evaluating several acquisition opportunities in this space, both locally and globally.

Aramco plans to boost its refining capacity to between 8 million and 10 million barrels per day, from around 5 million bpd now, and double its petrochemicals production by 2030, Abdulaziz Al Judaimi, the firm's senior vice president for downstream told Reuters in June.

Aramco and Sabic signed an agreement in November to build a $20 billion oil-to-chemicals facility on the Red Sea Coast of Saudi Arabia – the world’s largest such refinery under the plans.

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Read more:

Aramco, Sabic sign up KBR for $20bn oil-to-chemicals scheme

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Saudi Aramco and Sabic to build world's largest oil-to-chemicals plant

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The chemicals complex will be integrated with the existing refinery in the industrial city of Yanbu and is targeted for completion in 2025. It is set to process 400,000 barrels per day of oil into around 9 million tonnes of chemicals and base oils annually.

“The project will help achieve the respective growth ambitions of Sabic and Saudi Aramco and further establish the kingdom as one of the pioneers in the petchem industry,” Sabic’s vice-chairman and chief executive Yousef Al Benyan said at the time.

In April, the partners said they had awarded US engineering firm KBR a project management contract to develop the scheme.

Aramco has announced other plans to boost profitability from the sale of products besides crude. Earlier in April, it signed an agreement to develop a $44bn integrated refining and petrochemicals complex in western India, its first foray in the South Asian consuming market.

The scheme is planned to have refining and chemical capacities for 1.2 million barrels of crude and 18 million tonnes of products annually.

Aramco said on Thursday it would make further announcements on the Sabic discussions, if appropriate, “in compliance with applicable regulations”.