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Saudi Arabia’s Trillion Dollar Gamble Could Be A Bust

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Back in March, Saudi Aramco split from Royal Dutch Shell in a $2.2 billion breakup, leaving the Saudi Arabian government as the sole owner of the largest US oil refinery. Port Arthur, Texas’ Motiva Enterprises LLC could be just the beginning of a Saudi conquest of US oil as Aramco’s IPO--the largest in history--quickly approaches.

Saudi Aramco’s efforts to expand downstream investment and international joint ventures are not news, but the latest developments are a marked acceleration of the company’s aggressive strategy to move into foreign markets and evolve into a more integrated, diversified, and powerful company.

In recent years, the company has also been busy acquiring companies in China, Indonesia and Malaysia - a large part of Aramco’s core market. According to numbers published by Energy Digital, Aramco intends to double its global refining capacity, increasing from its current 5.32mn barrels per day (mb/d) to 10-12 mb/d, and to increase its global petrochemicals capacity by a huge margin from 12mn tonnes per year to 34mn tonnes.

The escalating efforts by Saudi Aramco to diversify, globalize, and cash in with a record-breaking Initial Public Offering are also making waves on a domestic level. For many investors eyeing next year’s IPO, it’s extremely unsettling that Aramco practically gifts its oil domestically at $6 a barrel--that’s 87 percent less than international prices. The exaggerated subsidy,…

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