Saudi Aramco Is Said in Talks With Russia's Sibur on Joint Plant

(Bloomberg) -- Saudi Arabian Oil Co., the world’s biggest oil exporter, is in talks with Sibur Holding PJSC, Russia’s largest petrochemical producer, about forming a joint venture to make synthetic rubber in the desert kingdom, according to two people with knowledge of the discussions.

Saudi Aramco, as the state-owned company is known, and Sibur are expected to sign a memorandum of understanding for the project next month when Saudi King Salman Bin Abdulaziz visits Russia, said the people, who asked not to be identified because the talks are private. Talks are at an early stage, they said.

Aramco didn’t immediately respond to requests for comment, while Sibur’s press service declined to comment, referring to comments that the company’s Chairman Dmitry Konov made in June about general cooperation talks between the two entities.

The venture would be Saudi Aramco’s first project with a Russian company that didn’t involve energy exploration or production. It conforms with Aramco’s strategy of boosting investments in refining and petrochemicals to reduce its reliance on crude sales. Aramco began earlier this year to fully operate Sadara Chemical Co., a $20 billion venture with Dow Chemical Co., in Jubail, Saudi Arabia. In 2015, Aramco invested in a venture with Germany’s Lanxess AG that makes elastomers, which are used to make golf balls bouncier and chewing gum softer.

Royal Visit

King Salman is scheduled to visit Russia on Oct. 4-7 and meet President Vladimir Putin, Prime news service reported last week, citing an unidentified official in Moscow. Saudi Arabia and Russia were instrumental in an agreement that the Organization of Petroleum Exporting Countries and other major suppliers reached in December to cut output to help drain a global oversupply.

Sibur has been expanding in other emerging markets since 2011, when the company reached an agreement with China Petroleum & Chemical Corp., also known as Sinopec, to set up two rubber joint ventures. Ties with China strengthened as Sinopec and Silk Road Fund bought 10 percent each in the Russian company amid the Kremlin’s energy pivot toward Asia, triggered by U.S. energy sanctions. While Sibur is not on the international sanctions list, its co-owner, Russian billionaire Gennady Timchenko, became a sanctions target in 2014 over his close ties to Putin.

Saudi Aramco’s other local venture with a Russian partner, called Luksar, was owned equally by Aramco and Lukoil PJSC and focused on searching for and developing natural gas in the Saudi Rub’ al-Khali desert, also known as the Empty Quarter.

--With assistance from Dina Khrennikova

To contact the reporters on this story: Wael Mahdi in Kuwait at wmahdi@bloomberg.net, Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net.

To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Bruce Stanley