Saudi Aramco in talks to buy stake in petrochemical firm
Deal would move Aramco toward goal of becoming modern, integrated-energy company
Saudi Aramco Thursday said it’s in early talks to buy a stake in one of the world’s largest petrochemical company’s, an acquisition that would boost the staterun oil giants downstream operations even as the future of its proposed initial public offering remains in doubt.
A deal to buy a stake in Saudi Basic Industries Co., or Sabic, would allow Aramco to vastly expand its petrochemical operations and move toward its stated goal of becoming a modern integrated-energy company, along the lines of Exxon Mobil Corp. and Royal Dutch Shell.
Aramco said it has no plans to acquire any publicly held shares of Sabic.
The Public Investment Fund, Saudi Arabia’s sovereign-wealth fund which owns a 70% stake in Sabic, confirmed the talks with Aramco. The two entities didn’t disclose the size of the stake under discussion for Sabic, which is the largest listed company on the Saudi stock market.
The partial or full sale of its stake in Sabic to Aramco will help boost the Public Investment Fund’s cash pile as it looks for global investment opportunities to diversify the kingdom’s income. The Public Investment Fund was once a sleepy investor in Saudi infrastructure, but it has broken out in recent years to allocate tens of billions to a joint tech fund with SoftBank Group Corp. and hunt for deals across the world.
The state oil company was until recently focused on pumping great quantities of oil and boosting its global refining capacity to offset losses stemming from the Organization of the Petroleum Exporting Countries decision to cut production in an attempt to alleviate a market glut.
Aramco said it has been evaluating a number of acquisition opportunities, both locally and globally as part of the company’s strategy to rebalance its portfolio by moving further into the downstream sectors, especially petrochemical.
Last year, Aramco and Sabic signed an agreement to build a chemicals complex to convert 45% of crude oil to chemicals directly.
The $20 billion project would yield about 9 million metric tons of products a year.
Aramco’s planned transformation is intertwined with a longterm plan to diversify the Saudi economy, an effort led by Saudi Crown Prince Mohammed bin Salman who wants to reshape the kingdom’s oil-dependent economy by supporting other sectors such as petrochemicals.
But the downstream expansion comes as the future of Aramco’s IPO remains in doubt.
Preparations for the blockbuster listing, a centerpiece of the government’s plan to open its economy, have stalled, leaving government officials and people close to the process doubting that it will go forward at all.