Aramco To Buy Shell’s Stake In Refining JV

Aramco will buy Shell’s stake in their jointly owned refining company SASREF for US$631 million as part of an ambitious expansion strategy for Aramco’s downstream business to secure markets for its future crude oil production.

“Saudi Aramco will take full ownership and integrate the refinery into its growing downstream portfolio. SASREF will continue to be a critical facility in our refining and chemicals business,” Reuters quoted a statement by the companies as saying.

For Shell, on the other hand, the sale is part of an ongoing streamlining drive combined with a divestment program that has seen the supermajor sell US$30 billion worth of assets over the past few years in a bid to reduce its substantial debt load after the acquisition of BG Group.

The news coincided with another report of a Saudi acquisition: Arabian Drilling Company said it would buy the local business of Schlumberger, as quoted by Saudi media citing anonymous sources. The value of the deal remained undisclosed.

Earlier this month, media reported that Aramco wanted to double the capacity of its refinery network to 10 million bpd by 2030. This would make it the biggest refiner in the world and accomplish the company’s goal of securing markets for its future oil output as the world moves away from crude but not away from petrochemicals, apparently.

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Since organic growth for the Saudi major’s refining business would not hit the 10-million-bpd mark fast enough, Aramco is expanding through acquisitions. The latest here is negotiations for the acquisition of a 25-percent stake in the refining and petrochemicals business of India’s Reliance Industries. According to Indian media reports, a stake sale of this size could cost US$10-15 billion, with the whole business valued at US$60 billion. However, Reliance is now looking to up this, improving the potential proceeds from the deal.

Also in India, Aramco is taking an active investment part in the US$44-billion Ratnagiri refinery and petrochemicals project. It has, however, run into delays, which would mean cost overruns, after Ratnagiri farmers refused to give up the land needed to build the complex and it had to be moved from that region to neighboring Raigad.

By Irina Slav for Oilprice.com

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