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DAVOS: Amin Nbader, President and CEO of Saudi Aramco, had a busy few days at the World Economic Forum (WEF) annual meeting in Davos.
"We had about six hours at the International Business Council, three hours at the oil and gas community, two hours at the Climate Change Initiative – and then about 40 bilateral meetings. In Davos, every minute counts, he says.
Nbader s' expressed in a private lounge of the hotel Grischa, near the main station of the Swiss Alpine town. He had a plane to take, but spent some of the precious minutes that remained in Davos to talk to Arab News – the fourth industrial revolution, technology, the environment, emissions of carbon and sustainability.
But first, we talked about the upcoming Saudi Aramco Initial Public Offering (IPO). The future stock market listing of the world's largest oil company and the Kingdom's economic dynamo was announced later this year, but that calendar slipped in 2021, as Nbader explained.
Did he feel disappointed or anticipating the delay of the IPO? "No. What I have to say about the IPO is that a lot of work has been done and the commitment is there and the proof is what has already been done by the government and by the corporation.We have amended the tax rules, entered into a new franchise agreement, turned Aramco into a stock corporation and put in place many tax reforms to facilitate the creation of a list, "he said. -he declares.
Only a few weeks ago, Aramco announced the results of an audit by DeGolyer & MacNaughton, the oil industry's leading independent expert, who had revealed that Aramco had a treasure of 263.1 billion barrels of oil in its concession area. estimates. It was one of the essential conditions for the IPO.
"All that is required for registration is there. If the government decided, it could be done in no time, "he said. So why did not it happen?
Basically, explained Nbader, because an alternative strategic game appeared. Aramco decided that the priorities were more pressing, including the merger with SABIC, the giant petrochemical and Kingdom industry.
"We came to the government and declared that our wish was to become the world's leading petrochemical company. We can do it in an organic or inorganic way. We are always looking for opportunities in this area and we have huge investments in petrochemicals with Dow Chemical and Sumitomo. However, if you want to be the leader, you need an acquisition, a major acquisition. You need a platform, a good platform to be able to globalize, especially with our decision to turn 2 to 3 million barrels of oil into petrochemicals.
"So we approached the Public Investment Fund (Saudi Arabia's ambitious sovereign wealth fund) to find out if it was interested in selling their shares in SABIC, and they were interested. We had discussions with them and we went back to the government and we said … Based on our governance requirements and regulations, you can not register Aramco as long as we make a major acquisition. It does not work. This process must take its course and the government said it was good. Because you can not make the list either, then come three or four months later and say that you are going to acquire a business. This should be included in the IPO prospectus.
The approximately $ 70 billion SABIC deal will turn Aramco into a global petrochemical giant and its implementation will take time.
"We need to enter into a share purchase agreement and we are currently discussing with PIF about this. When we reach an agreement, we must seek approval of regulations and antitrust laws. It will take almost until the end of the year 2019, or maybe a little bit more; We do not know because you need the approval of many countries in which SABIC operates significantly. SABIC is not a small company, it's a very big company. So you have to get many approvals from many countries, "he said.
"Once you're done, you need a minimum of one year for the purchase to appear on your balance sheet. It has to be consolidated and show what is the impact on our balance sheet – where is the integration, where is the value, because the investors will want to see … After that, you will be able to go to the market, did he declare.
"It will happen. There is no doubt that the commitment is there, and this has also been confirmed by Crown Prince Mohammed bin Salman and by the Minister of Energy, Khalid Al-Falih. Both say that the commitment to the IPO is there, "he insisted.
But Nbader admitted that the problem was how to finance the acquisition of SABIC, which will be the largest acquisition ever made in the Middle East.
"We have different funding mechanisms to fund it. We have our cash, as well as other financing mechanisms, such as the bond market, and other tools necessary for a sustainable capital program. All these financial tools will therefore be used as soon as we reach an agreement, "he said without indicating the amount of the bond issue. This is the first time that Aramco has invested in global debt markets, but Nbader has been encouraged by the recent enthusiastic response to a $ 7.5 billion bond that the Kingdom has lifted.
The next Aramco bond will take place in market conditions that have been the subject of a gloomy prognosis in Davos. WEF opinion leaders have witnessed turbulence in the global financial and economic markets in 2019 and are worried about the US-China "commercial" war, as well as the lack of confidence. other global economic disruptions.
The implications for the oil markets are obvious. An economic slowdown in China and other major economies would undermine the appetite for oil and gas and could lead to a fall in prices of the Kingdom's most valuable badet.
However, according to his conversations in Davos, Nbader did not seem too concerned about global economic forecasts.
"We believe that the market, in terms of global stocks, tends to stay within the average of the last five years. It is a sign of a balanced tightening of supply and demand, which is very important. We are optimistic about the market in 2019 in terms of price and tightening of supply and demand. The more balanced it is, the better the market. And we think there is still a healthy demand, "he said. He estimated that there was only a 15% chance of a global recession in 2019.
"So far, China's demand is good, as evidenced by imports from Saudi Aramco, and it is growing. Asia in general is a major market – it is the epicenter of global energy demand and growth is very strong. China and India are very important to us, "he said.
This leaves Aramco the opportunity to pursue its long-term strategy – to become a global leader in oil, gas, petrochemicals, refining and energy trading – as well as a pioneer in technology. energy.
Aramco is already one of the dominant forces in the global oil industry, helping of course to fix the price of crude through supply contracts with other oil producers. But his immediate ambitions are in gas, where he has so far played a less important role at the global level. Nbader wants to change that, especially in terms of Saudi domestic consumption.
"By 2030, 75% of the utilities sector (in the Kingdom) will be gas – fired, the rest will be made up of renewable and nuclear energy sources. We will therefore have gas leaving the Kingdom to export markets, by pipeline or by LNG. We will be exporters for the first time, "he said.
Aramco is studying potential agreements in the international gas sector, with potential partners in Russia, the United States and Australia, he said, adding, "We will be a global gas leader in the Kingdom, but we We also wish to be a major player on a global scale. He would also consider acquisitions in the American shale gas industry. "We have no interest in shale oil … we have a lot of conventional oil at a much lower cost. But gas interests us, let me say so, "he said.
In Davos, one of the major themes was the challenge posed by climate change, and Nbader made it clear that Aramco is among the "best in the category" of major energy groups. He welcomed a recent academic study ranking Saudi Arabia as the world's second largest producer of energy with regard to the carbon intensity of emissions upstream, just behind the Danish minnow and far ahead of other major producers, the United States and Russia.
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Technology is the key to Aramco's future as a clean energy company. While in Davos, the company has been recognized as a technology leader for its Uthmaniya gas plant, the world's only energy producer to receive the WEF's "Lighthouse" Award for technological innovation.
"Aramco is already in the era of the Fourth Industrial Revolution," Nbader said.
The company invests heavily in technology in 12 centers around the world, each examining aspects of innovation in energy conservation, fuel formulation, engine technology and carbon capture. .
Nbader believes that alternative and renewable sources of energy play an important role, but believes that the challenge of the traditional energy sector of the electric vehicle industry has been overestimated.
He pointed out that there were only 5 million electric vehicles in the world today, which represents about 50,000 barrels of oil moved out of a total world consumption of 100 million barrels. Many of these electric vehicles run, of course, with the energy generated by the highly polluting coal industry.
"You do the math." Our vision for EV is that it will continue to grow and it will be a great growth story, but we strongly believe that by 2040 we will have to use all the sources in the mix energy to supply the world. "
From here to here, if all goes to the strategy set by Nbader and the Saudi energy minister, who is also chairman of Aramco, the world's largest oil company will be a publicly traded company, a world leader in the energy sector and a defender of digital industrial technology. But Nbader insisted that he would stay true to his roots as the source of the kingdom's fortunes.
"We try to ensure that whatever your place of business, you bring added value to the community you are in. We value the importance of caring for our stakeholders and our shareholders, "he said.
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