Saudi Aramco on an expansion course

Published on: 15-Apr-2019
Category: Trading
Last updated: 15-Apr-2019

Saudi Aramco on an expansion course

Saudi Aramco is preparing for a takeover of the Saudi chemical company Sabic and plans its IPO indefinitely.

The oil giant owns 268.5 billion barrels of oil and gas reserves of 9.2 trillion cubic meters and accounts for ten percent of world crude oil production. Covering an area of ??832 square kilometers, Saudi Aramco is producing oil for $ 111.1 billion last year. The Saudi company is making more sales than Google's parent Alphabet, Apple and US oil giant Exxon. However, high taxes such as 50 percent tax or a dividend distribution to its owner, Saudi Arabia, of $ 58.2 billion will mean lower profits per barrel of crude oil at Saudi Aramco than its rival Royal Dutch Shell.

The first bond issued by Saudi Aramco has now grossed $ 12 billion. This number gives an outlook on the planned IPO of the company. This will privatize five percent of the capital and generate $ 100 billion. The IPO of Saudi Aramco would be the largest in the history of the stock exchanges and would be significantly ahead of that of Alibaba, the Chinese Internet trader, with 24 billion dollars.

In addition, Saudi Aramco plans a partial takeover of the chemical company Sabic and needs 69.1 billion dollars to take over 70 percent of the group. The business figures were published for the first time by a rating of the agencies Moody's and Fitch. The money wants to bring Aramco namely on the capital market, and thus also aims at a transformation of the three most important companies in Saudi Arabia. These include Saudi Aramco, Sabic and the Saudi Public Investment Fund (PIF). The oil company buys the shares of the petrochemical group Sabic from PIF and thus provides capital for a long-term investment strategy.

The two companies would have huge capacities totaling 79 million tons of petrochemical products per year, making them a new big competitor to the regional oil companies. The Saudi giant would have to prevail against rivals from the United Arab Emirates and Qatar, both of whom are investing in their chemical production to secure their future.


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