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Petronas not to take part in Saudi Aramco IPO

November 26/2019

MOSCOW (MRC) -- With Saudi Aramco yet to name any major foreign investors in its upcoming share sale, Malaysia’s state energy company Petronas decided to take a pass, reported Reuters.

Expectations that Aramco customers and allies around the world would take significant stakes in the company have so far not materialized, with the listing looking like it will be reliant on local retail and institutional investors.

Petronas follows Russia’s second largest oil producer Lukoil in turning its back on the initial public offering (IPO) which is likely to rank Aramco as the world’s most valuable company.

Petronas and Aramco have a joint venture in a USD27 billion refinery and petrochemicals complex in southern Malaysia that is set to start commercial operations this year.

Aramco kicked off the sale process on Nov. 3 after a series of false starts and Petronas, which has a joint venture with the Saudi firm in Malaysia, said it had been asked to invest.

"Petronas would like to confirm that after due consideration, the company has decided not to participate in Saudi Aramco’s initial public offering exercise," Petronas said in an emailed statement.

Aramco is a major oil supplier to China, Japan and South Korea and their plans for the IPO are not yet clear, however, the head of Japan’s largest refiner said earlier this month that Japanese companies were unlikely to invest because it was difficult to ascertain Aramco’s true value.

Aramco plans to sell 1.5% of the company, looking to raise up to USD25.6 billion and giving the company a potential market value of between USD1.6 trillion and USD1.7 trillion.

It is the centerpiece of Crown Prince Mohammed bin Salman’s plans to diversify the Saudi economy away from its reliance on oil.

But the company has canceled marketing roadshows for its listing outside of the Gulf because of the lack of interest from foreign institutional investors.

That has raised questions about to what extent the listing can really diversify the country’s economic interests.

"Just selling a 1.5% stake in an oil company is not really going to achieve an enormous amount," said Charles Hollis, a former UK-Saudi diplomat and director at intelligence consultancy Falanx Assynt.

Aramco did not immediately respond to a request for comment on potential anchor investments or the impact its IPO will have on diversifying the economy.

Saudi Arabia’s Samba Financial Group said on Thursday that the IPO has attracted about 73 billion riyals (USD19.47 billion) in institutional and retail orders so far.

Although no major state company or fund has stepped forward, talks have been taking place with sovereign investors including the Abu Dhabi Investment Authority, Singapore’s GIC and other funds, sources have told Reuters.

As MRC informed earlier, Saudi Aramco, which temporarily lost half of its oil production following the September 14 attacks on two key oil facilities, is running its local refineries at full capacity and is forging ahead with plans to start up new refineries. The company is also starting up a joint venture refinery in Malaysia next year. According to Aramco's bond prospectus released in April, the refining and petrochemical joint venture with Petronas - the Malaysian national oil company - collectively known as PRefChem, was supposed to start this year.

The PRefChem joint venture includes a 300,000 b/d refinery, an integrated steam cracker with capacity to produce 1.3 million mt of ethylene located in Johor, Malaysia. Aramco was supposed to provide a significant portion of PRefChem's crude supply under a long-term supply agreement. Jazan and PrefChem will help Aramco reach a gross refining capacity of 5.6 million b/d, it said in the prospectus. The company currently owns and has stakes in four refineries abroad with a total refining capacity exceeding 2 million b/d.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polyprolypele (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,436,390 tonnes in the first eight months of 2019, up by 9% year on year. Shipments of all PE grades increased. At the same time, the PP consumption in the Russian market was 909,260 tonnes in January-August 2019, up by 10% year on year. Shipments of PP block copolymer and homopolymer PP increased.

Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.
Author:Margaret Volkova
Tags:PP, PE, crude and gaz condensate, homopolymer PP, propylene, ethylene, petrochemistry, PP bags, Petronas, PRefChem, Saudi Aramco, Malaysia, Russia, Saudi Arabia.
Category:General News
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