Daily Management Review

Ahead Of Giant IPO, Saudis, Oil Majors Discuss Gas Investments: Reuters


Ahead Of Giant IPO, Saudis, Oil Majors Discuss Gas Investments: Reuters
As part of the top crude-exporting country's drive to diversify investments before the listing of national energy giant Saudi Aramco, Saudi Arabia and international oil companies have discussed gas venture opportunities inside the kingdom and abroad.
New agency Reuters reports quoting industry sources that at a time of booming energy demand at home, investment opportunities for development of its gas reserves, the world's sixth largest, are being explored by Saudi officials explored investment opportunities with firms including BP and Chevron.
The sources said that including with Italy's Eni, Aramco has also looked into investing in gas ventures abroad.
Known as the Saudi gas initiative, similar talks were held at the end of the 1990s and early 2000s between Aramco and global majors. But since the parties disagreed over returns on investment, most of those talks collapsed.
Aiming to get a valuation of up to $2 trillion in what could be the world's biggest initial public offering (IPO), this time, Aramco is gearing up for a share listing next year.
There has bene no comments by Chevron, BP, Aramco and Eni.
"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. I don't have anything particular to say about Saudi Arabia," Chevron CEO John Watson had said last week.
This year he wouldn't rule out "creative partnerships" with Aramco but that an outright investment by BP in the IPO was unlikely, BP Chief Executive Bob Dudley, who traveled to Saudi Arabia at the end of last year.
By reducing oil burning at home and freeing up more crude for export, the kingdom has a long-term goal of increasing the use of gas for domestic power generation.
Saudi Arabia is the world's fifth-biggest oil consumer despite being only the 20th-biggest economy and this measure could help increase Aramco's valuation as it generates more revenue from exports than selling oil at lower domestic prices.
Aramco was interested in investing in international upstream ventures, particularly gas, and could invest in importing gas into the kingdom, said Saudi Energy Minister Khalid al-Falih, who is also Aramco's chairman, last year.
Sources familiar with the discussions said that aimed at developing resources to keep pace with rising domestic demand, Aramco is preparing to reveal in the next few months a new gas strategy.
Amid a global drive to phase out the most polluting fossil fuels, a strategy known as "Vision 2030" which pushes the country to diversify its economy away from oil and this is a part of that strategy.
In the next decade, Aramco wants nearly to double gas production to 23 billion standard cubic feet a day.
"IOCs (international oil companies) are waiting for that (strategy) to make their decisions," one industry source familiar with the matter said.
He wanted Aramco to partner with other companies in upstream projects, said Energy Minister Falih had said in private meetings with Western oil executives, reported Reuters quoting another industry source.
An interest in investing in gas exploration in the Red Sea was expressed by BP's Dudley.
According to BP's annual energy review, gas reserves in excess of 8 trillion cubic metres is controlled by Aramco. In addition to onshore shale gas, it wants to explore for gas in the shallow waters of the Red Sea, the Saudi company has said.

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