Aramco Mulls IPO for $5B Export Refinery
Monday May 9, 2:59 pm ET
Aramco Considers Initial Public Offering for $5 Billion Export Refinery
LONDON (AP) -- State-owned Saudi Arabian Oil Co. said Monday it plans to list a $5 billion export refinery on the Saudi stock market, marking the first time private Saudi investors would be allowed to own a piece of the world's biggest oil producer.
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Saudi Arabian Oil, commonly known as Aramco, has been seeking foreign partners for the refinery, which is valued at between $4 billion to $5 billion and has a capacity to produce 400,000 barrels day, said Isam A. Al-Bayat, Aramco's vice president of new business development.
A foreign partner such as one of the world's major oil companies would lock in customers, he said, guaranteeing revenue in what's traditionally been a volatile business.
Aramco has a shortlist of potential partners that includes Asian and U.S. companies.
A domestic listing could eventually open up the refinery to foreign investors. Under current law, the Saudi stock market, the biggest in the Middle East, is open only to Saudis or neighboring members of the Gulf Cooperation Council. But regulators say these laws could be lifted within a few years.
It's not immediately clear why Aramco has decided on an IPO. The company has appeared to have had a hard time drawing in foreign investors to a sector that has, until recent high oil prices, operated under thin margins.
U.S. refiners have generally opted to upgrade existing facilities rather than overcome the economic and environmental hurdles of building new refineries.
In addition, Aramco's huge commitment to spend some $50 billion to raise crude oil production to 12.5 million barrels a day by 2009 could make it more attractive to tap into the soaring domestic capital markets to spread some of the venture's risk.
"We are ready whenever the investor is ... " al-Bayat said.
Aramco will spend some $20 billion to $23 billion in materials and equipment through 2010, al-Bayat said, part of its efforts to meet strong world oil demand.
A big part of that effort is expanding its refineries. Al-Bayat also said upgrading the 400,000 barrel-a-day Rabigh refinery into an integrated petrochemicals complex should be done by 2008. Aramco signed a memorandum of understanding with Sumitomo Chemical of Japan last May.
Aramco is also considering a $6 billion upgrade to its Ras Tanura and Ju'aymah refineries and petrochemicals plants.
Saudi Arabia's petrochemicals industry is already partly privatized through Saudi Basic Industries Corporation, or Sabic, which has listed 30 percent equity on the Saudi market.
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