Aramco Looks to Boost Refining and Chemicals Through Additional Deals in Asia

Saudi Aramco, the largest oil exporter globally, is actively pursuing refining and chemicals deals in Asia as part of its ambitious strategy to rapidly expand its business and secure enduring buyers for its crude oil. The focus is particularly on China and India, both significant players in the Asian market where the majority of Aramco's crude oil is sold. The company aims to capitalize on the continually growing demand for oil and its related products in the region.

As part of its strategic moves, Aramco is exploring potential acquisitions and partnerships in China and India. Given the substantial investments made in downstream activities exceeding $80 billion since 2016, Aramco is keen on leveraging opportunities in Asia. In China, the company has already taken substantial steps by acquiring a stake in one company last year and is currently engaged in discussions for two additional partnerships. The motivation behind this concerted effort lies in Saudi Arabia's anticipation of increased demand for petrochemicals, essential components in the production of goods like plastics, expecting this demand to rise consistently in the decades to come.

While discussions in China are progressing rapidly, similar talks are underway in India, where Aramco is engaged in dialogues with potential partners and customers, aiming for tangible investments on the ground. In the past, Aramco had been on the verge of investing in India through a partnership with Reliance Industries Ltd. A non-binding letter of intent had been signed in August 2019 for a potential 20 percent stake in Reliance's oil-to-chemicals unit, valued at around $15 billion. However, both parties announced their withdrawal from the deal in 2021.

A significant milestone in Aramco's downstream endeavors was the completion of the $70 billion acquisition of a majority stake in Saudi Basic Industries Corp. (Sabic) in 2020. This acquisition, known as Aramco's largest downstream move to date, provided the company with a considerable portfolio of chemical investments globally, accelerating its downstream ambitions.

Despite these advancements, Aramco's downstream business currently remains overshadowed by its upstream unit, primarily involved in the production and sale of crude oil. The third quarter of 2023 saw the upstream unit reporting pretax earnings of $60 billion, a stark contrast to the $5.3 billion reported by the downstream unit. Moreover, there is still ground to cover to achieve Aramco's longer-term goal of converting 4 million barrels of oil daily into chemicals.

Saudi Aramco's pursuit of refining and chemicals deals in Asia underscores its strategic approach to diversifying and expanding its operations. The focus on China and India aligns with the company's recognition of the continued significance of the Asian market in the global energy landscape. Through these endeavors, Aramco seeks not only to meet the increasing demand for oil-related products but also to position itself strategically in the evolving energy transition scenario. As discussions and potential partnerships unfold in Asia, the company is poised for further transformative developments in its downstream ventures.