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Saudi Aramco investing $500 billion to diversify into natural gas and chemicals

28/11/2018
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Saudi Aramco, the world’s biggest oil exporter, is aiming to diversify its brand by entering in to the growing natural gas market. The company has earmarked $500 billion for investment over the next 10 years. 

From that investment, $160 billion will be put in to natural gas developments, and $100 billion in to chemicals projects.

Saudi Aramco has earmarked $500 billion for investment and diversification, including $160 billion to develop and export natural gas and $100 billion for petrochemical projects
(Image via Aramco)

Natural gas

Demand for natural gas is currently the fastest growing area in the Oil & Gas industry, with much of that coming from the Far East. The kingdom of Saudi Arabia is looking to capitalise on this, and Aramco’s plans are to increase their gas output by 65% and begin exporting it. 

Amin Nasser, CEO of Aramco, said the plans to create an integrated international gas business would “attract investments of about $150bn over the next decade, with daily production reaching 23bn standard cubic feet a day from the current 14bn.

“[Shale gas] production will play an important role in the further growth of the kingdom’s chemicals sector.”

It’s known that there are vast shale gas resources throughout Saudi Arabia - particularly fields in the northwest, south of Ghawar and in the Jafurah basin - but historically they’ve been viewed as expensive to extract due to their depth, remoteness, lack of water and lack of infrastructure. 

Aramco’s investments will see new technologies and methods being implemented to overcome these issues, plus construction of all new infrastructure in the regions. 

An early stage deal has already been signed with Shell to jointly pursue global gas business opportunities, including upstream development and liquefaction projects.

Saudi Aramco are planning the world's largest share sale; offering $70 billion for 70% of Sabic from the sovereign Public Investment Fund
(Image via Aramco)

Petrochemical

Projections for the petrochemical industry by the International Energy Agency suggest that demand is expected to rapidly increase in the coming years, and will account for a greater percentage of global crude output. 

These projections are, in part, the reason for Aramco’s significant $100bn petrochemical investment plans. 

The company reportedly wants to convert 3MMbopd of crude oil in to chemicals. This represents around 30% of its daily output. It also aims to double its refining capacity by the middle of the next decade. 

“You can absorb market volatility when you are balanced between upstream and downstream,” said Nasser. “This is where our strategy is going.”

A further part of Aramco’s plans involve the purchase of a majority stake in Saudi Basic Industries Corp. - commonly known as Sabic.

Sabic is the Middle East’s largest chemical business, and the proposed deal will be the world’s largest share sale at around $70 billion for 70% of the business. 

This deal will take the shares away from the sovereign Public Investment Fund. According to Nasser, negotiations are expected to conclude soon and “all financial instruments are on the table” for funding it.

The deal will be part of the larger incentive by the Saudi sovereignty to transform the national economy. Crown Prince Mohammed bin Salman is leading a strategy to build new industries and diversify the kingdom away from its reliance on the sales of oil. 

Aramco’s purchase of Sabic will generate significant funds for the Crown Prince’s transformation project, while allowing the company to diversify itself. 

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Saudi Aramco investing $500 billion to diversify into natural gas and chemicals - Time to read 4 min
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