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Riyadh RIYADH – Saudi Aramco plans to make a significant investment in the company as part of its efforts to diversify into key markets and boost refining and petrochemicals at the expense of crude oil exports, said Reliance Industries yesterday.
This decision was made after Aramco announced its first annual results after decades of discretion, thus confirming its quest for a rating to strengthen its ability to borrow on the financial markets and to prepare to sell a share of its shares through a deferred IPO since 2018.
Reliance said that Aramco had signed a letter of intent to acquire a 20% stake in Reliance's petroleum-to-chemicals business in one of the largest foreign investment operations. never made in India.
This trend is part of Aramco's accelerated efforts to expand its presence and operations in the downstream sector,
These include refining, chemicals and marketing, as well as strengthening the capacity of its refineries to secure new markets for its crude oil and to reduce the risk of declining oil demand.
Aramco officials said the company is exploring several downstream opportunities in India, including Reliance, to tap into large growth opportunities, having been a major supplier of crude oil to Indian refiners for decades under long-term contracts. term.
Aramco holds interests in refineries or storage badets in other major markets, such as China, Japan and South Korea, as well as in the United States, where it owns the largest US refinery.
A source close to the agreement confirmed that the agreement with Reliance, once finalized, will help Aramco increase its oil deliveries to India.
10 million bpd of Saudi refining capacity targeted by 2030, compared to 5 million currently
Aramco, which has eluded any comment on the Indian deal, has announced a net profit of $ 46.9 billion in the first half of 2019, down from $ 53 billion for the same period of the year. 39, last year. But it has maintained its position as the most profitable company in the world.
"Despite lower oil prices in the first half of the year, we continued to deliver solid earnings and free cash flow, supported by our ability to sustain our operational performance, expense management and discipline. financial, "said in a statement the general manager of Aramco, Amin Nbader.
During the first half, the company generated a total business turnover of 163.88 billion USD, including sales-related sales, down from 167.68 billion USD l & # 39, previous year. But free cash flow rose 6.7% to $ 38 billion.
Aramco wants to increase its investments to triple its production of chemicals to 34 million tonnes per year by 2030 and increase its refining capacity to 8-10 million barrels per day instead of 5 million currently.
Aramco Petroleum Products Trading, Aramco's commercial arm, is also expanding abroad to better compete with global trading companies.
According to officials, the Aramco agreements show how Riyadh wants to ensure that it will be the last oil producer to survive when demand for crude oil declines in the future. He points out the difficulty of competition because of the low cost of production of about 4 dollars a barrel.
Aramco announced yesterday that it will maintain its position as the world's largest oil producer, continue to expand its gas production and maintain its strong financial position. "Aramco has a strong financial capacity to continue investing for future growth," he said.
The company announced a $ 46.4 billion payment to the Saudi government, including a special distribution of $ 20 billion, up from $ 32 billion a year ago, which shows that Riyadh is heavily dependent on Aramco for finance the state budget.
The IPO was halted last year when Aramco transferred its stake in Saudi Basic Industries Corp. (SABIC) up to 70%.
According to Aramco, crude oil production averaged about 10 million barrels a day in the first half of this year, almost unchanged from the same period last year.
Aramco's data suggest a net profit of $ 111 billion this year, more than a third of the combined net profit of the five largest oil companies in the world, Exxon Mobil, Royal Dutch Shell, BP, Chevron and Total.
Saudi Arabia is imposing restrictions on its production under an OPEC-led agreement to reduce global oil supplies in order to boost prices and eliminate glut. It plans to further restrict its exports in order to reduce world stocks and increase crude prices.
Riyadh has strongly re-entered Aramco's initial public offering, which badysts say is the cornerstone of global economic transformation by boosting the attractiveness of foreign investment to diversify the economy and reduce dependency. to oil revenues.
According to bank sources, Crown Prince Mohammed bin Salman is keen to increase Aramco's value to $ 2 trillion before entering the financial markets and offering up to 5% of its shares.
Bankers and sources close to Aramco believe that Saudi Arabia should reduce the company's target value to about $ 1.5 trillion.
Aramco has resumed talks with several international banks on the IPO. A source close to the company revealed that its board of directors would meet in a few days to discuss the value of Aramco, which neither the Saudi government nor the government commented on.
This comes at a time when many countries around the world are demonstrating their efforts to reduce emissions and switch from fossil fuels to the fight against global warming, putting pressure on oil prices as growing public concern grows. warn against climate change.
Sources close to IPO projects said that if Aramco did not consider market valuations, it meant that Riyadh was "in no hurry and that it could postpone it." ".
Saudi Arabia has the right maneuvering tools and is not in a weak position to implement Aramco's IPO, unless the goals of the vision and national interests are useful.
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