Saudi Aramco it is studying a reorganization of its structure to create an independent gas division, while analyzing new ways to attract external capital.
The Saudi state oil company plans to reorganize its business by creating a new gas division according to sources familiar with the company’s plans, the move could also pave the way for a future IPO of a minority stake in this unit.
Currently, Aramco organizes its main operations into two major segments, upstream, which covers exploration and production activities, and downstream, focused on refining, marketing and other associated businesses.
With the eventual reorganization, gas would become a third, independent segment, with its own structure and a president dedicated exclusively to this area. Saudi Aramco has not made any public comments on these plans.
A gas division with Jafurah as a strategic asset
Creating a specific platform would allow Saudi Aramco to concentrate the development of its national natural gas resources in a single structure and, at the same time, advance in building an international portfolio of liquefied natural gas (LNG).
One of the core assets of this strategy is Jafurah, Aramco main unconventional gas development in Saudi Arabia and one of the most important projects of its kind outside the United States.
The development began operations last year and is part of a broader Saudi Arabian energy strategy aimed at replacing some of the oil used to generate electricity with natural gas.
This change would free up larger volumes of crude oil for other uses, including exports, Aramco estimates that, when its unconventional gas program reaches peak production, it could replace the energy equivalent of approximately 500,000 barrels of oil per day.
Aramco is considering an initial public offering of its gas business
The oil company is also considering listing a minority stake in its future gas division on the stock exchange as an additional way to obtain financing.
The operation would be in line with a strategy used by several large Gulf state oil companies, which have opened certain areas of business to external investors without relinquishing operational control.
A close example is ADNOC, the UAE state oil company, which has brought to market stakes in businesses related to gas, drilling and retail fuel distribution.
Aramco also has experience in capital markets, the company went public in Saudi Arabia in 2019 and also holds stakes in listed companies, including the petrochemical group SABIC.
New formulas for raising capital
In addition to a possible public offering of a stake in its gas business, Saudi Aramco is studying other financing mechanisms linked to its infrastructure assets.
Among the alternatives are lease-and-leaseback operations, through this model, certain assets are transferred or leased to investors in exchange for initial capital and subsequently continue to be used by the company through lease agreements.
This type of agreement allows for obtaining liquidity by leveraging the value of the infrastructure without giving up its operational use during the agreed period.
Aramco has already used this formula in Jafurah, where last year it obtained $11.000 million through an agreement related to its gas processing facilities, signed with a consortium led by Global Infrastructure Partners, a firm belonging to BlackRock.
Gas is gaining importance within Saudi Aramco strategy
Creating a specialized division would allow for a clearer separation of gas business growth from Saudi Aramco’s traditional oil operations.
The company seeks to develop its domestic reserves while expanding its presence in the international LNG market, a strategy that is making natural gas, and especially the Jafurah project, increasingly important components of its energy portfolio.
An independent structure would also prepare the business to receive external capital should Aramco decide to proceed with a minority listing on the stock exchange.
If the reorganization goes ahead, Saudi Aramco would move from its current large upstream and downstream segments to a structure with three main areas, in which the natural gas would have its own division.
Source: Reuters
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