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Saudi Aramco eyes $160 billion in investments in downstream push

Dubai — Saudi Aramco is refocusing its business on major downstream initiatives in refining, petrochemicals and natural gas production now its IPO is firmly on the backburner.

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Chief executive Amin Nasser said Tuesday the kingdom plans to invest $160 billion in the next 10 years on gas developments and plans to direct more feedstock into petrochemicals ahead of its acquisition of Saudi Basic Industries Corp (Sabic) and the construction of new processing facilities on the east coast.

"We need to scale up technology [for using crude to produce petrochemicals]," Nasser said on the sidelines of the 13th Annual GPCA forum in Dubai. He did not provide a timeline. "We are targeting the convergence of up to 70% of the feedstock into petrochemicals."

The world's largest single exporter of crude is looking for new ways to expand its global footprint after its proposed $2 trillion international listing of up to 5% of its shares was postponed by the government earlier this year. Petrochemicals have been identified as major source of future growth and the state-owned company is planning to buy government-controlled Sabic, which is the Middle East's largest producer of plastics and chemicals.

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Middle East producers are investing heavily in plastics and petrochemicals production at an uncertain time for demand as major consumer nations consider banning the products due to environmental concerns. However, the sector is still expected to be the biggest driver for oil consumption, accounting for 30% of oil demand growth by 2030, according to the IEA.

On November 1, Saudi Aramco announced that along with Sabic it has selected Yanbu on the west coast of Saudi Arabia as the site for the construction of a crude-to-chemicals complex. The complex, which Aramco said will be "unprecedented," will process 400,000 b/d of crude to produce 9 million mt/year of various petrochemicals and base oils. Production at the plant is expected to start in 2025.

The two companies have been studying the technology behind construction of this complex since June 2016.

GOING FOR GAS

Meanwhile, the Middle East's biggest economy faces a shortfall of gas unless more domestic resources are produced. Aramco's Nasser sketched out plans to boost output by 64% over the next decade during the forum in Dubai.

"Our gas program will attract almost $160 billion of investment in the next 10 years, with production reaching close to 23 Bcf/day, from a current rate of 14 Bcf/day," Nasser said.

Unconventional gas resources will be increasingly used to complement conventional sources, according to Nasser. Across the Gulf region there has been a significant uptick in investment in unconventional gas exploration, with the UAE announcing several high-profile deals with international investors this month to develop ultra-sour gas fields.

Aramco's increased gas production will be used to help fuel growth in the chemicals sector, Nasser said.

"We have plans for substantial expansion in refining," Nasser said. "Our ultimate target is to reach 8-10 million b/d of refining capacity and create a better balance between our upstream and downstream segments."

Global investments from Aramco will total $100 billion over the next 10 years, without including potential and ongoing acquisitions.

Aramco is also boosting its gas and downstream activities to support the governments strategy to diversify the kingdom's economy away from dependence on crude. Saudi is the world's largest exporter, producing about 11 million b/d of crude.

-- Miriam Malek, Shashank Shekhar, newsdesk@spglobal.com

-- Edited by Alisdair Bowles, newsdesk@spglobal.com