Saudi Arabia eyes gas investments
The kingdom is looking for opportunities ahead of Aramco IPO
13 April, 2017
Saudi Arabia and international oil companies have discussed gas venture opportunities inside the kingdom and abroad as part of the top crude-exporting country's drive to diversify investments before the listing of national energy giant Saudi Aramco, news wires reported. Saudi officials explored investment opportunities with BP, Chevron, Eni and other majors in order to develop the country’s gas reserves, at a time of booming energy demand, industry sources told Reuters. However, all the companies declined to comment on talks.
The development revives memories of talks between Aramco and global majors at the end of the 1990s and early 2000s, known as the Saudi gas initiative. Most of those talks collapsed as the parties disagreed over returns on investment. This time, Aramco is gearing up for a share listing next year, aiming to get a valuation of up to $2 trillion in what could be the world's biggest initial public offering (IPO).
“We have a long-standing relationship with Saudi Arabia, so it is not uncommon for us to talk to them. We're always having discussions about business development,” Chevron CEO John Watson told Reuters. BP CEP Bob Dudley, who travelled to Saudi Arabia at the end of last year, said this year he wouldn't rule out “creative partnerships” with Aramco.
The kingdom has a long-term goal of increasing the use of gas for domestic power generation, thus reducing oil burning at home and freeing up more crude for export. This could help increase Aramco's valuation as it generates more revenue from exports than selling oil at lower domestic prices.
Aramco is preparing to reveal in the next few months a new gas strategy aimed at developing resources to keep pace with rising domestic demand, sources familiar with the discussions said. It comes as part of the kingdom's push to diversify its economy away from oil, a strategy known as “Vision 2030”, amid a global drive to phase out the most polluting fossil fuels. Aramco wants nearly to double gas production to 23 billion standard cubic feet a day in the next decade.
The Saudi state major controls gas reserves in excess of 8 trillion cubic metres, according to BP's annual energy review. The Saudi company has said it wants to explore for gas in the shallow waters of the Red Sea as well as onshore shale gas.