Here’s how Saudi Aramco is spreading its footprint worldwide

Saudi Arabia’s Vision 2030, announced in April 2016, sets ambitious targets for economic diversification, privatization, and employment creation. State-owned oil giant Saudi Aramco, through its strategic overseas investments including joint ventures and acquisitions, has steadily begun the push for economic diversification -- one of the key objectives of Vision 2030.

“Overseas investments are intended to build partnerships, increase margins on refining and petrochemicals, secure and build markets for Saudi oil, and enable optimization between different crude grades and refined oil product types. Aramco’s overseas petrochemical investments have the additional aims of building a true international company and accessing new technologies,” says Robin Mills, CEO of Qamar Energy.

In addition, Aramco is also working in the emerging markets to achieve a better balance between its well-established upstream and its growing downstream portfolio.

“The company’s downstream strategy seeks to enhance the value of the hydrocarbon resource base by targeting increased horizontal and vertical integration across the value chain. The successful execution of the downstream strategy would deliver a world-leading, strategically integrated downstream network and a robust portfolio that is more resilient to market turbulence,” says Vinod Raghothamarao, Director Consulting at IHS Markit.

Argaam takes a look at five of Saudi Aramco’s biggest overseas investments in 2018:-

China

In October this year, Saudi Aramco signed a memorandum of understanding (MoU) with China’s Zhejiang provincial government to acquire a stake in a refinery being constructed by Zhejiang Petrochemical.

The agreement includes plans to invest in a new refinery and co-operate in crude oil supply, storage, and trading. Aramco is yet to finalize the size of its stake and still needs to carry out due diligence, said Abdulaziz al-Judaimi, senior vice president of downstream.

India

In June 2018, UAE’s Abu Dhabi National Oil Company (Adnoc) and Saudi Aramco signed a deal which allows the former to jointly invest in the development of the $44 billion Ratnagiri refinery and petrochemicals complex coming up in the western Indian state of Maharashtra.

Previously in April, Saudi Aramco had signed an agreement to take a stake of up to 50 percent in the 1.2 million barrels crude oil refinery project, which is planned to come on stream by 2025. The June agreement allowed Aramco to dilute some of its equity stake in the refinery in favor of another strategic investor.

Indonesia

Aramco Trading Co. (ATC), the trading arm of Saudi Aramco, signed a term contract with Indonesia’s Pertamina to supply gasoline for the first time over the period from July to December 2018.

ATC will be shipping about one million barrels monthly of 88-octane and 92-octane gasoline grades, the traders said.

United States

Saudi Aramco’s fully-owned US subsidiary Motiva Enterprises signed two MoUs with Technip FMC and Honeywell UOP at a total value between $8 billion and $10 billion respectively in April this year.

The first MoU will help Motiva evaluate using TechnipFMC plc’s world scale mixed-feed ethylene production technologies in the US. The second deal will enable Aramco's wholly-owned downstream oil and gas subsidiary to test Honeywell's technology to extract aromatics for producing benzene and paraxylene, so as to set up a petrochemical complex on the US Gulf coast.

Malaysia

In March, Saudi Aramco and Malaysia’s Petroliam Nasional Berhad (Petronas) formed two joint ventures (JVs) for the Refinery and Petrochemical Integrated Development (RAPID) project.

The JVs allow the two companies equal ownership and participation in the operations of the new refinery, cracker, and selected petrochemical facility, which is part of the RAPID project.

Under the partnership, Saudi Aramco will supply 50 percent of the refinery’s crude feedstock requirements with the option of increasing to 70 percent. Meanwhile, natural gas, power, and other utilities will be supplied by Petronas and its affiliates.

Both companies will share the rights to offtake the production of the JVs on an equal basis.

Write to Paromita Dey at paromita.d@argaamplus.com