LNG

Saudi Aramco is preparing to tap the giant Jafurah shale gas basin in a bid to reduce oil dependence, positioning the Kingdom as a potential LNG exporter. Aramco CEO Amin Nasser singled out the field’s “huge” growth potential, though analysts doubt the Saudi gas market can absorb all the extra supply.

Saudi Arabian Oil Company (Saudi Aramco), the largest oil exporter, posted a 25 percent plunge in annual profits, though still increased its dividend for investors and outlined its plans to investment more in LNG and in domestic natural gas output.

The Saudi Arabian Oil Company, Saudi Aramco, has signed one of the world’s largest ever energy infrastructure deals worth $12.4 billion with the Washington DC-based EIG Global Energy Partners fund as part of a program to secure private capital for more broad-based activities such as new energy projects.

Aramco, a future player in the LNG market and a developer of green energy such as hydrogen, reported record production during 2020 of natural gas as well as oil.

This is the first major deal by Aramco since its stock exchange listing in late 2019 when the Saudi government sold a minority stake in the firm for $29.4Bln in the world’s biggest initial public offering.

The EIG group has now signed a lease and lease-back agreement with Aramco, acquiring a 49 percent equity stake in the newly formed Aramco Oil Pipelines Co., with rights to 25-years of tariff payments for oil transported through Aramco’s crude oil pipeline network.

Aramco will still own a majority 51 percent stake in the new company. The deal comes at a time when the Saudis are aiming to boost domestic natural gas output and are looking at investments in the LNG market and green gases for clean energy supplies for Asia.

“The transaction reflects ongoing progress in Aramco’s portfolio optimization program, which aims to unlock value and maximize shareholder returns,” said Aramco.

“Significant injection of foreign capital reinforces Aramco’s leading position in the international energy arena and Saudi Arabia’s appeal to prominent institutional investors globally,” added the Saudi company.

Upon closing, Aramco will receive upfront proceeds of around $12.4Bln, further strengthening its balance sheet.

The investment firm EIG has invested more than $34Bln in energy and energy infrastructure projects around the world.

Analysts noted that the transaction would not impose any restrictions on Aramco’s actual crude oil production volumes that are subject to production decisions issued by the Kingdom itself.

“This landmark transaction defines the way forward for our portfolio optimization program,” said Aramco President and Chief Executive Amin H. Nasser.

“We are capitalizing on new opportunities that also align strategically with the Kingdom’s recently-launched Shareek program,” added Nasser.

Saudi Arabia’s Crown Prince Mohammed bin Salman launched the Shareek program in March 2021 to strengthen collaboration between the government and the private sector, which he said would enable private investment of 5 trillion Saudi riyals ($1.33 trillion) through 2030.

The word “Shareek” , which means “Partner” in Arabic, and its associated program is aimed at helping the world’s largest oil exporter to reduce its dependence on crude oil and achieve its other ambitious goals in the realms of clean energy and smart-city technologies.

“Aramco’s strong capital structure will be further enhanced with this transaction, which in turn will help maximize returns for our shareholders,” explained Nasser.

“Additionally, our long-term partners in this venture will benefit from investment in one of the world’s most robust energy infrastructures. Moving forward, we will continue to explore opportunities that underpin our long-term strategy,” added Nasser.

R. Blair Thomas, EIG’s Chairman and CEO, said he was honoured to partner with Aramco, describing the company as an undisputed industry leader.

“Aramco’s oil pipeline network is a marquee global infrastructure asset. We look forward to investing in this infrastructure which is critical to the global economy, and to driving value for our institutional investors worldwide,” stated Thomas.

The Saudi Arabian Oil Company, Saudi Aramco, reported a 44 percent drop in annual profits, though still earned a net $49 billion in 2020 as it posted record oil and natural gas output even as revenues were affected by lower crude oil prices and sales tumbled because of the economic slump caused by Covid-19.

Qatar and Saudi Arabia have spoken up for the LNG and oil export prospects of the Arab Gulf region and with both countries also embracing technologies for carbon-capture and renewable energies.

The Saudi Arabian Oil Company President and Chief Executive Amin Nasser said that “the worst is definitely behind us” for the crude oil market, as global demand is recovering and is currently at 90 million barrels per day.

The Saudi Arabian Oil Co., the biggest crude oil company partly responsible for swamping the globe with supplies amid a demand plunge, has taken the opportunity to boost its downstream business with an internal deal valued at $69 billion amid gas and LNG plans.

Saudi Aramco’s competition with Russia on output in March 2020 sparked the worldwide drop in oil prices and along with the Covid-19 pandemic caused the energy sector to suffer from earnings erosion across all sectors, including LNG.

Saudi Aramco itself last month posted a 25 percent drop in first-quarter net income to $16.7 billion from $22.21Bln in the prior-year quarter.

The company has now positioned itself to be one of the major global petrochemicals players.

Saudi Aramco has just announced the successful completion of its share acquisition of a 70 percent stake in Saudi Basic Industries Corporation (SABIC) from the Public Investment Fund (PIF), the sovereign wealth fund of Saudi Arabia.

Four huge transactions were executed on the Saudi stock exchange, known as the Tadawul, involving SABIC shares. The total purchase price was 259.125 billion riyals (US$ 69.1Bln).

“The completion of the transaction enhances Aramco’s presence in the global petrochemicals industry, a sector expected to record the fastest growth in oil demand in the years ahead,” said the oil company.

“The acquisition of the SABIC stake is consistent with Aramco’s long-term Downstream strategy to grow its integrated refining and petrochemicals capacity and create value from integration across the hydrocarbon chain,” it stated.

Saudi Aramco had previously said it was aiming to enter the natural gas and LNG markets in the next couple of years and one of its subsidiaries has an accord to invest in Sempra Energy's Port Arthur LNG export project in Texas and to buy offtake.

Port Arthur like other ventures in the US and elsewhere will now likley be delayed. The Saudis also plan to cooperate with the United Arab Emirates on opportunities in the natural gas and LNG value chain.

Saudi Aramco and the Abu Dhabi National Oil Co. have a framework agreement to collaboration on gas and LNG in a deal that brings together the leading energy producers from the Arabian Gulf.

Amin Nasser, President and Chief Executive of Saudi Aramco, said he was excited about taking control of petrochemicals giant SABIC.

“It is a significant leap forward which accelerates Aramco’s Downstream strategy and transforms our company into one of the major global petrochemicals players,” said Nasser.

“The strategic integration of our Upstream production and Downstream chemicals feedstock production with SABIC’s chemicals platform is expected to create opportunities for selective integration synergies that support growth and add value for shareholders,” he added.

Saudi Aramco, the Saudi Arabian oil producer and one of the world’s largest companies by revenue, and Abu Dhabi National Oil Company have signed a framework agreement to explore opportunities for cooperation in the natural gas and liquefied natural gas sectors between Saudi Arabia and the United Arab Emirates.