Wood Mackenzie believes that Saudi Aramco’s decision to issue a US$10 billion bond underscores how serious the company is about transforming itself into an international powerhouse across the oil and gas value chain, from upstream to petrochemicals.
Stewart Williams, Vice President, Middle East & North Africa Upstream, at Wood Mackenzie, said: “Diversifying its business is critical to Aramco’s long-term success, and the ambition aligns Saudi Arabia’s Vision 2030 economic diversification. The US$69 billion SABIC acquisition was a major step, the bond issue helps fund it.”
He added: “Aramco now wants to become an undisputed global energy champion, not just the world’s leading oil producer. It aims to be the leading player in refining and marketing, trading, petrochemicals and global gas. By 2030, it could be the world’s premier integrated oil and gas company.
“But this will take sustained investment and more large-scale M&A. Step changes are needed in all of Aramco’s business segments bar upstream oil. SABIC is the first step. There will be more.”
Diversifying will allow the company to extract full value from oil and gas production through integration across the value chain. Aramco aims to increase its already large refining capacity to match its huge oil production and plans to convert 2 to 3 million bpd of oil production to petrochemicals by 2030.
“Aramco is well placed to succeed. Its low-cost, cash-generating oil business gives it huge financial firepower it can direct towards new business development. Success could see the proportion of company value in upstream oil move from over 90% to less than 75% through next decade.”
Williams added: “There will be challenges. Oil prices are still critical. But Aramco is right to focus initially on the SABIC acquisition. But with its finances there for all to see, many will be now asking what’s next on Aramco’s shopping list.”
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