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Oil Prices Rise As Supply Shrinks

Oil Prices Rise As Supply Shrinks

Oil prices rose early on…

Aramco Eyes $16 Billion Investment In Small/Mid-size Businesses

Aramco is planning to spend some US$16 billion on contracts with small and medium-sized enterprises in a bid to expand cooperation with this segment of the economy, Reuters reports, citing Saudi media.

Every year, the Saudi oil giant spends some US$45.33 billion (170 billion riyal) on various services, Al Arabiya quoted the company’s deputy director of procurement and supply, Mohammed bin Ayed al-Shamri as saying. At least part of this money could be used to stimulate the growth of small and medium enterprises in an economy trying to wean itself off the oil that has been feeding it for decades.

The sum pales in comparison with Aramco’s growth strategy for the future. In addition to several refinery projects in Asia, which will cost it a few dozen billion dollars, the oil giant is also expanding internationally in other ways, eager to diversify away from just crude oil production and exports.

Last November, Aramco’s chief executive Amin Nasser said the company will spend US$500 billion over the next ten years to expand internationally, with a fifth of the total amount earmarked for petrochemical projects and US$160 billion for natural gas projects.

Nasser noted that the investment sum was separate from the US$70 billion it is planning to splash on the acquisition of a majority stake in local petrochemical major Sabic, which Aramco recently said it will fund with a combination of its own cash and money raised through an international bond.

Related: Goldman: The Renewables Revolution Is Good For Big Oil

“We need a major acquisition for us to be in different markets quickly,” Nasser told Bloomberg in November, referring to the Sabic acquisition. Petrochemicals demand is seen by many analysts as the primary crude oil demand driver of the future, so it makes sense that a company the size of Aramco is looking to gain greater exposure to this segment of the industry.

Plans are for Aramco to use almost a third of its daily production rate, or some 3 million bpd of crude oil, to produce chemicals. Also, the company eyes a twofold increase in its refining capacity by 2025. “You can absorb market volatility when you are balanced between upstream and downstream,” the chief executive said. “This is where our strategy is going.”

By Irina Slav for Oilprice.com

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