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Abu Dhabi, UAESunday 16 December 2018

Saudi Aramco signs co-operation agreements worth $10bn in the US

Nearly half of the agreement is on upstream equipment, with the remainder relating to cloud, cybersecurity and research

Aramco chief Amin Nasser said its investment in India formed part of its global downstream strategy. Simon Dawson/Bloomberg
Aramco chief Amin Nasser said its investment in India formed part of its global downstream strategy. Simon Dawson/Bloomberg

Saudi Aramco signed preliminary co-operation agreements worth $10 billion with leading US oil services companies, the world’s top oil producing company said.

Nearly half of the agreements were signed with Schlumberger, Baker Hughes, Halliburton, Weatherford for procurement of equipment and services related to drilling for oil, in the wake of Saudi Crown Prince Mohammed bin Salman's three-week visit to the US this month, the company said.

“It takes an extended period of time for these mammoth undertakings to be completed, resulting in significant transformation in the areas where they are implemented, and offers enormous opportunities for action, partnerships and investment,” Aramco chief executive Amin Nasser said.

Aramco, the world’s largest oil company, which accounts for 13.4 per cent of the global production, is preparing for an initial public offering that will list 5 per cent of its shares worth around $100bn.

The oil company, valued at $2 trillion by Saudi Arabia, traces its roots to early American oil entrepreneurism, with Aramco a shortening of Arabian Oil Company. The name is a relic of the company’s ownership in the 1930’s by the predecessor to what is now known as Chevron.

While Saudi-led Opec and US shale producers compete aggressively in oil markets, with the latter developing capabilities to react quickly to changes in crude prices following the downturn, American expertise is still used in the development of the Saudi energy industry.

New York is one of three potential international markets shortlisted by Aramco in the run-up to its IPO, however, concerns over possible litigation have made the US’s commercial capital less attractive in comparison with competing hubs of Hong Kong and London. Aramco is considering an international listing in addition to floating on the Saudi stock exchange, Tadawul.

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On Tuesday, Aramco also signed co-operation agreements with Raytheon for cyber security services, as well as Google Cloud to explore potential for establishment of cloud services.

Mr Nasser told a US audience that Aramco was also looking at co-operation in “infrastructure, manufacturing and service industries.”

Various other agreements were also signed with the National Geographic, Smithsonian and Centre for Strategic and International Studies to advance media, cultural and research engagements respectively.

Crown Prince Mohammed who led the Saudi delegation to the US, told Reuters in an interview on Tuesday that Saudi-led Opec and Russia, the largest sovereign producer outside the exporters’ group, are considering an oil alliance lasting 10 to 20 years.

In February, The National was the first to report that Opec and its allies, currently slashing production to bolster prices, are considering formalising their existing alliance into a “super-group”.