Saudi Aramco in talks with PIF on SABIC deal: Al-Falih

Saudi Aramco is currently negotiating with the Public Investment Fund’s (PIF) to acquire a stake in Saudi Basic Industries Corporation (SABIC), which would represent a great leap for the industry, Energy Minister Khalid Al-Falih told Argaam’s sister site Akhbar 24.

“If materialized, it will be a qualitative shift for the industry, and will create more synergy between both (petrochemical and oil) sectors,” he said at a news conference in Riyadh.

As a result of the deal, SABIC will be more efficient and secure, which will greatly benefit its investors. Aramco will enjoy a strategic dimension and stable revenue away from the effect of the fluctuations in oil prices, he said.

In addition, the Kingdom will see more manufacturing industries from the hydrocarbon and petrochemical sectors as a result of the integration, which would further strengthen the Saudi economy.

“Therefore, when we’re ready for the IPO, we will get the best valuation, as the investor will see Aramco’s sustainability and financial strength, as well as its ability to add value and expand, both upstream and downstream,” the energy minister said.

As for the Kingdom’s mineral resources, Prince Mohammed previously said that Saudi mines have about SAR 5 billion ($1.3 billion) worth of mineral resources, Al-Falih said, adding that the number could increase after launching the recently approved mining strategy.

Saudi funds are also supporting local firms and startups working in the mining business. Meanwhile, two copper routes are in the final stages for approval now, one on the east coast and the other on the west coast, after achieving several successes in steel, aluminum, phosphate and gold.

Restructuring the steel sector is underway in order to diversify steel products to be more competitive.

The objective behind developing the mining sector is not just profit-making from the mines and production, but to create a strong competitive base, adding value, increase exports, generate jobs for Saudi citizens and provide investment opportunities for leading firms such as Maaden, SABIC, and most importantly small and medium enterprises (SMEs), Al-Falih added.

Crown Prince Mohammed bin Salman said to Bloomberg that buying a stake in SABIC would significantly change Aramco’s valuation. He expects Aramco to finalize the acquisition of PIF's 70 percent stake in the petrochemical producer in 2019, after which Aramco will wait for one fiscal year to launch the IPO.