Aramco to Spend $500 Bln on Expansion

Aramco's planning to splash $500 billion on international expansion focusing on petrochemicals. That's on top of the Sabic deal, by the way. Why? Because a wider exposure to downstream along with upstream will, wait for it, make the company more resilient to oil price volatility. Who would have thought, right?

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2 hours ago, Marina Schwarz said:

Aramco's planning to splash $500 billion on international expansion focusing on petrochemicals. That's on top of the Sabic deal, by the way. Why? Because a wider exposure to downstream along with upstream will, wait for it, make the company more resilient to oil price volatility. Who would have thought, right?

Eggs in one basket.

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Research the profitability of Aramco's Joint Ventures over the years. Aramco historically pays a lot for the short straw. A good deal for the other partner(s).

There is an element of buying your customers and salve for politicians. 

And yes, a petrochemical company can benefit from lower oil prices, but petrochemicals is a margin business, and crude oil margins for the KSA are much higher than what a petrochemcial company has. A business that makes money selling to itself tends to get into trouble.

 

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On 11/26/2018 at 5:59 PM, Marina Schwarz said:

Aramco's planning to splash $500 billion on international expansion focusing on petrochemicals. That's on top of the Sabic deal, by the way. Why? Because a wider exposure to downstream along with upstream will, wait for it, make the company more resilient to oil price volatility. Who would have thought, right?

Over here in Malaysia, Saudi Aramco has invested around USD $7 billion in the Pengerang downstream refinery.  Aramco's larger goal is to lock in a home for its crude oil exports.  Saudi Aramco is committed long term to providing at least half of the crude oil imported for Malaysia's massive petrochemical refinery.  Note that Malaysia's Pengerang petchem refinery will rely solely on imported crude oil, and will not be using any domestic Malaysian crude oil for feedstock.

So, Saudi Aramco has secured long term crude oil exports to Malaysia, and Aramco's only real competitor for this is Iraq, who will be the other major source of crude oil for Malaysia's Pengerang petchem refinery.

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