Aramco Seeks Top Refining and Chemicals Spots to Bolster Growth

(Bloomberg) -- Saudi Aramco is pressing ahead with plans to become the world’s biggest oil refiner and a top chemicals maker to secure future demand for its crude and bolster growth.

The state oil producer is looking to invest in projects that are already built or under construction in markets with the fastest-growing demand such as India and China, said Abdulaziz Al-Judaimi, Aramco’s senior vice president for downstream. Expanding in chemicals will boost profitability in this business, which processes crude into fuels like gasoline or products like plastics, he said.

“We have massive reserves” of oil, Al-Judaimi told reporters during a presentation at the company’s headquarters in Dhahran. “Our first objective is to monetize those reserves.”

Aramco is pursuing its downstream expansion as the Saudi government and its bankers seek to convince investors to accept a nearly $2 trillion valuation for the company, before a planned share sale. The initial public offering, billed as the world’s largest, has suffered repeated delays. The IPO was rescheduled last year, to give Aramco time to acquire state chemical maker Sabic. The share sale was pushed back again last week, just days before it was set to be formally announced.

Using Saudi Arabia’s nearly 300 billion barrels of oil in the ground -- the worlds’ biggest conventional reserves -- to attract cash into government coffers is a cornerstone of Crown Prince Mohammed Bin Salman’s push to diversify the Saudi economy. Part of that plan rests on Aramco’s ability to create jobs by spurring new manufacturing industries that turn its chemicals into finished consumer goods. Some analysts have questioned whether Aramco should continue to pursue its downstream ambitions or seek to save cash.

Attack Recovery

The company has recovered from aerial strikes on some of its largest oil facilities last month, which temporarily cut production by more than half. Most domestic refineries, which reduced processing runs after the attacks to make more crude available for export, have returned to full capacity, Al-Judaimi said. One domestic refinery in Jubail is undergoing 40 days of scheduled maintenance and is set to be back online in mid-November, he said.

Aramco is processing all of its crude to export quality after restoring capacity at the damaged Abqaiq processing plant and Khurais field, said Ibrahim Al-Buainain, chief executive officer of Aramco’s energy trading unit. By Sept. 25 the company had raised production at the two facilities to 6 million barrels a day, slightly higher than the level of output at the time of the Sept. 14 attacks, he said, speaking later Monday in Dhahran.

The company is back to producing crude at normal levels after it raised output briefly to re-stock storage depleted after the September attacks, Al-Buainain said. Saudi Energy Minister Prince Abdulaziz bin Salman said the country would pump about 9.9 million barrels a day in October.

Aramco’s $69 billion acquisition of a majority stake in the state chemical company officially named Saudi Basic Industries Corp. is set to close in the first or second quarter next year, propelling it to be one of the worlds’ biggest makers of the products that are the building blocks for consumer goods, Al-Judaimi said.

A separate deal to buy a stake in Indian refiner Reliance Industries Ltd. could close in 2021, Al-Judaimi said. The transaction would boost Aramco’s gross refining capacity to more than 8 million barrels a day, meeting the company’s target for the end of the decade, he said.

To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net

To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, James Herron, Rakteem Katakey

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