Saudis discuss gas deals with oil firms

Saudi Arabia and international oil companies have discussed gas venture opportunities inside the kingdom and abroad as part of the top crude-exporting country’s drive to diversify investments before the listing of the domain’s national energy giant Saudi Aramco.

Saudi officials explored investment opportunities with firms including BP and Chevron to help develop its gas reserves, the world’s sixth largest, at a time of booming energy demand at home, four industry sources told Reuters.

Aramco had also looked into investing in gas ventures abroad, including with Italy’s Eni, the sources said.

The development revives memories of talks between Aramco and global majors at the end of the 1990s and early 2000s, known as the Saudi gas initiative. Most of those talks collapsed as the parties disagreed over returns on investment.

This time, Aramco is gearing up for a share listing next year, aiming to get a valuation of up to $2-trillion in what could be the world’s biggest initial public offering (IPO).

“We have a long-standing relationship with Saudi Arabia, so it is not uncommon for us to talk to them. We’re always having discussions about business development. I don’t have anything particular to say about Saudi Arabia,” Chevron CEO John Watson told Reuters last week.

BP CEO Bob Dudley said this year he would not rule out “creative partnerships” with Aramco but that an outright investment by BP in the IPO was unlikely.

The kingdom has a longterm goal of increasing the use of gas for domestic power generation, thus reducing oil burning at home and freeing up more crude for export.

This could help increase Aramco’s valuation as it generates more revenue from exports than selling oil at lower domestic prices — Saudi Arabia is the world’s fifth-biggest oil consumer despite being only the 20th-biggest economy.

Saudi Energy Minister Khalid al-Falih, who is also Aramco’s chairman, said last year that Aramco was interested in investing in international upstream ventures, particularly gas, and could invest in importing gas into the kingdom.

Diversifying gas assets abroad would help Aramco achieve a better valuation and was attractive for investors, industry sources said.

SAUDI MINISTER SAID ARAMCO WAS INTERESTED IN INVESTING IN INTERNATIONAL UPSTREAM VENTURES