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Saudi Aramco looks far and wide

The Saudi state oil company seeks new joint venture opportunities across the energy chain

Ahead of its planned initial public offering, Saudi Aramco is in a dash to expand operations at home and abroad. It's exploring new openings in the upstream and downstream, with a march into petrochemicals turning into a run.

The Aramco action seems to spring from the leitmotif identified by chief executive Amin Nasser in a recent interview with Petroleum Economist: "Oil is important, but it's finite in terms of a resource. We need to utilise it the best way we can."

So the Saudi energy giant is looking for opportunities to expand oil refining and integrated petrochemicals ventures, at home and abroad. In one of the latest moves, Aramco has agreed to take a 50% stake in a proposed $44bn refinery/petrochemicals complex in Maharashtra on India's west coast. The other partners will be Indian Oil, Bharat Petroleum and Hindustan Petroleum.

"India has always been a priority destination for us," Energy Minister Khalid al-Faleh said. "It's geographically adjacent to the kingdom, it has a large population with a large economy."

Saudi Arabia's own population is growing fast—at average rate of 2.26% over the past four years to 33.5 million—and the country needs to make whatever investments it can to help grow the economy and create jobs for young people. Against this background, Aramco has signed a memorandum of understanding with Total to build a large petrochemical complex in Jubail on the kingdom's Gulf coast. The new facility will be integrated with an existing oil refinery—itself a joint venture between Aramco and Total.

In his interview with Petroleum Economist, Nasser also stressed the increasingly important role he saw for natural gas, focussing on the expansion of domestic production and formation of joint ventures at home and abroad. "We're looking to international gas to identify opportunities for gas that we can also bring to the kingdom," he said. "Our gas can bring us up to 70% [in the energy mix]. We're looking at ways of going beyond the 70% and adding more gas. Saudi Aramco is engaging currently with a lot of companies to identify opportunities for gas internationally."

One of those companies, it turns out, was Shell. During the recent visit to London by Crown Prince Mohammed bin Salman, Aramco signed a preliminary agreement with Shell to pursue international gas opportunities. This is likely to mean Aramco forming joint ventures to develop Shell's upstream operations in various parts of the globe that have integrated liquefied natural gas projects. Saudi Arabia would then be a customer for the LNG.

Shell chief executive Ben van Beurden told Reuters that "it is a discussion that began some time ago and now we have signed a memorandum to work on gas projects from upstream to downstream and in Saudi Arabia. Concrete projects will be announced in due course."

The coming weeks will show how many other discussions have been underway between Aramco and the world's oil majors, as the kingdom's energy giant extends its global reach—while preparing for the IPO.

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