Saudi Aramco set to take 70% stake in SABIC

SAUDI Aramco has agreed to buy a 70% stake in SABIC for US$69.1bn. It is part of national plans to integrate and develop downstream chemicals production and fund a wider economic shift that will reduce Saudi Arabia’s reliance on oil.

Reports of a potential tie-up between the two state-owned majors first began circulating in July last year. Saudi Aramco has now confirmed it will buy the stake in SABIC from Saudi Arabia’s sovereign wealth fund (PIF), providing public money needed for the country to fund its ambitious plan called Saudi Vision 2030. This includes developing a world-leading downstream chemicals industry and mining the country’s untapped mineral wealth in a bid to reduce its self-declared dangerous addiction to oil. The PIF was supposed to secure funds from an initial public offering (IPO) of a portion of Saudi Aramco first announced in 2016, but the IPO itself has been periodically delayed with the latest estimate that it will take place by 2021.

Amin Nasser, CEO of Saudi Aramco said: “This transaction is a major step in accelerating Saudi Aramco’s transformative downstream growth strategy of integrated refining and petrochemicals.”

Saudi Aramco said the deal will help it meet plans to increase its refining capacity from 4.9m bbl/d to 8-10m bbl/d by 2030, of which 2-3m bbl/d will be converted into petrochemical products. Saudi Aramco currently produces 17m t/y of petrochemicals compared to SABIC’s 62m t/y.

The two agreed in 2017 to work together to develop a US$20bn crude-oil-to-chemicals complex that would process 400,000 t/y of crude into 9m t/y of chemicals and base oils. The FEED for the project was awarded to KBR and a greenfield complex is expected to begin operations in Saudi Arabia in 2025.

The partners have offered little detail on the technology planned for the complex other than to say the process will involve innovative configurations with proven conversion technologies; and that it will lead to a fully-integrated petrochemical complex that generates the world’s highest proven yield conversion rate.

Commenting on the tie-up with Saudi Aramco, Yousef al-Benyan, SABIC CEO, said: “SABIC will benefit from the additional scale, technology, investment potential, and growth opportunities Saudi Aramco will bring as a global leader in integrated energy and chemicals production, while remaining focussed on meeting the needs of our customers and the creation of value for all our shareholders.”

Saudi Aramco has said it will not seek to buy the remaining 30% stake in SABIC which is publicly traded.

The deal is subject to regulatory approval and a schedule for completion has not been announced.