Aramco changes may accelerate petchem reforms

State-owned Saudi Aramco is likely to accelerate petrochemical reforms under its new leadership, as it looks to maximise its valuation ahead of a planned initial public offering (IPO).

Riyadh yesterday announced the appointment of Prince Abdulaziz bin Salman as Saudi Arabia's new oil minister in place of Khalid al-Falih.

The change came just days after al-Falih was replaced as chairman of Aramco's board of directors by Yasir al-Rumayyan, governor of Saudi Arabia's PIF sovereign wealth fund.

Abdulaziz and Yasir are likely to forge ahead with the planned IPO of 5pc of the company, and al-Falih, who rose through Aramco's ranks to become chief executive, before becoming oil minister and chairman of the board, was not keen on the planned flotation.

Aramco may also be looking to assure investors of its independence from the Saudi government as the IPO approaches.

Downstream focus

Petrochemicals will be at the forefront of the IPO push following a slew of global investments announced this year.

The more value Aramco can extract from its downstream assets, the more it will increase its valuation and — by extension — the size of the IPO.

Aramco is waiting to close a deal to buy a 70pc stake in Saudi petrochemical firm Sabic, with a Saudi-based integration team finalising the new entity's structure.

The team, which is working on issues such as product branding and a sales and marketing structure, was expected to complete its work by mid-2020. But efforts to speed up the IPO mean the Aramco-Sabic integration is likely to be accelerated.

Aramco has already restructured its in-house chemical trading arm and set up a new subsidiary, Aramco Chemicals (ACC), in January this year.

ACC will handle sales and distribution of polymers and chemicals produced by Aramco joint ventures such as its Saudi-based PetroRabigh partnership with Japan's Sumitomo and tie-up with South Korea's S-Oil.

ACC will also market polymers from Aramco's Pengerang joint venture in Malaysia with the country's state-owned oil firm Petronas. New polymer products from the Pengerang complex are expected to hit the market in the first quarter of 2020.

Investment plans

Aramco is targeting global upstream and downstream investments worth $500bn in the next decade, including new petrochemical projects in China and India.

Aramco, Chinese industrial conglomerate Norinco and local government-owned Panjin Sincen established a joint venture in February to develop a fully integrated refining and petrochemical complex in the Chinese city of Panjin.

And Aramco last month signed a deal to acquire 20pc of private-sector Reliance Industries' refining and petrochemical assets in India.

The Saudi firm could speed up plans to announce other downstream investments to extract even more value from its proposed IPO.

No dates for the IPO have been announced, although an international listing is widely expected to happen in 2021 or 2022. A domestic listing on the Saudi stock exchange has not been ruled out.

The IPO has long been touted as a cornerstone of Saudi crown prince Mohammad bin Salman's Vision 2030 drive to diversify the country's economy away from its dependence on oil.