Aramco Wants to Buy Up More Chemicals Companies

(Bloomberg) -- Saudi Aramco will seek more acquisitions to speed its expansion in refining and petrochemicals as Saudi Arabia pushes ahead with plans to diversify its economy from reliance on sales of crude.

The purchases will be in addition to Aramco’s planned purchase of government-controlled chemicals producer Saudi Basic Industries Corp., Aramco Chief Executive Officer Amin Nasser said Tuesday in a speech in Dubai. The deal to buy the chemicals producer, known as Sabic, from the Saudi sovereign wealth fund could be valued at about $70 billion.

“Saudi Aramco will make the most of those prospects with global investments in the chemicals space of roughly $100 billion over the next 10 years -- in addition to prospective acquisitions,” Nasser said.

Aramco, the world’s biggest oil exporter, plays a key role in Saudi efforts to develop new industries and sources of income. Crown Prince Mohammed bin Salman is championing a plan to diversify the economy and create jobs. The Sabic deal will help fund that project by shifting funds from Aramco to the wealth fund. The plan necessitated a delay in Aramco’s initial public offering, a cornerstone of the diversification plan, until 2020 or 2021, Prince Mohammed said in an interview in October.

“The talk now is about 2021, more or less,” Nasser said. “You need to at least have one year of financial performance with Sabic shares reflected in our financial statements before we can go to the market to list Saudi Aramco.”

Overseas Markets

To tap into growth for fuels and chemicals, Aramco, known formally as Saudi Arabian Oil Co., wants to more than double its refining capacity by the middle of the next decade.

It also wants to transform as much as 3 million barrels of crude a day -- about 30 percent of its output -- into chemicals. Demand for petrochemicals will rise faster than for any other segment of the oil industry, according to the International Energy Agency.

“We are expanding this business both in Saudi Arabia and in fast-growing overseas markets,” Nasser said Tuesday.

Aramco will invest half a trillion dollars over the next 10 years in oil, natural gas, chemicals and refining projects, he said in an interview on Sunday at company headquarters in Dhahran, Saudi Arabia.

Unconventional Gas

The company is seeking to increase gas production as fuel for Saudi power plants and feedstock for chemicals as well as to free up more crude oil for export. With enough additional gas, Saudi Arabia can also begin exporting the fuel, Nasser said.

Aramco aims to boost gas production to 23 billion standard cubic feet a day and capacity to 25 billion within the next 10 years, compared with current gas output of 14 billion cubic feet a day, he said. As part of the effort, it’s developing so-called unconventional resources that are harder to develop than typical fields. The company has 16 rigs currently drilling for unconventional gas and has completed more than 70 wells this year, Nasser said.

That will contribute to Aramco’s goal of more than tripling unconventional gas production to 190 million cubic feet a day by the end of the year. Aramco began producing unconventional gas earlier this year, and it expects to pump 3 billion cubic feet a day from the harder-to-tap deposits by 2030, he said.

Nasser didn’t say when the company would become an exporter of gas, saying the timing will depend partly on domestic needs for fuel to generate power. When it does start exporting, the company plans to ship first to buyers in the Middle East and then look farther afield for sales.

©2018 Bloomberg L.P.